The BankservAfrica Economic Transaction Index (BETI) for the three months ending May 2020 reflected the sharpest decline in its history, showing that the economy recorded 20% less in transaction value than a year ago.
While the monthly BETI decline of -4,3% was not as substantial as April’s -14,2%, the March-to-May period represented the biggest drop on record with the actual total value of transactions lower than any period since April 2005 in real terms.
The size of the collapse in economic transactions that underlie economic activity is perhaps best reflected in the quarter-on-quarter comparison which crashed by 20,4%.
The actual volume of transactions declined by 9,1% on a year-on-year basis in May. The average value per transaction declined by 15,2% in nominal terms. The number of transactions in May was at its lowest level on a three-month moving average basis since October 2017.
But, also significant, the average transaction value in nominal terms declined to the extent that May reflected the lowest average since January 2014. This, however, was an improvement from April – the worst month since January 2013.
The average value per transaction was the lowest on BankServAfrica’s records (which goes back to January 2002) in the last two months in real terms. This has to do with the economic conditions surrounding Covid-19.
The South African Reserve Bank data showed a 10,4% increase in deposits of South African residents in April over the last year. This is the highest increase since the Great Recession of 2008/9 and ties with the collapse of economic activity.
With a great deal of uncertainty, people and businesses have reduced their spending considerably with more opting to invest in their savings.
The storage data for April showed 13% less goods in warehouses – although some energy storage sites stocked up on fuel products, such as petrol and jet fuel, that are not selling.
It is expected that mining and wholesale will also be affected with knock-on effects on their supply chains. Limited purchases for higher-priced items, such as vehicles, as well as property sales have also dented transaction levels.
On the whole, the BETI decline in May showed a decline that is far lower than that experienced in April. This is a hopeful sign that the worst is over. But a better reflection of the total economy lies in the difference between the quarter to May compared to the quarter to February.
BankServAfrica notes that the quarterly and annual data will for some time reflect declines as the size of the decline has been substantial.
The size of the BETI decline in the first two months of Q2 2020 suggests the economy remains under severe pressure.
A bounce back is likely off these lows, but the strength and sustainability of it would need to be monitored closely. BankServAfrica remains hopeful that lockdown level 3 may have a positive impact in June, but a double-digit decline in GDP for the second quarter can still be expected.