The BankservAfrica Economic Transactions Index (BETI), which measures the value of all electronic transactions cleared through BankservAfrica at seasonally adjusted real prices, showed a steady recovery in October 2024 following September’s weaker performance.
The latest movement indicates growing momentum in economic activity, confirming improved conditions since the BETI’s turning point in November 2023.
“The BETI increased in October to an index level of 136.5, 0.3% up on the 136.1 recorded in September,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. “At this level, the BETI is up by 4.5% compared to a year earlier.”
The BETI signals that the underlying momentum in the economy is picking up, reflecting improved economic conditions.
“When compared to the turning point in November 2023, the BETI is up by 4.3%, signalling that the economic recovery continues to unfold,” says independent economist Elize Kruger.
Improved confidence levels and more tangible shifts in the economic environment have led to activity gaining momentum relative to previous months.
“Consumers are currently experiencing moderating consumer price inflation, slightly lower interest rates, and real increases in salaries and wages, all of which should contribute to an improvement in purchasing power in Q4,” says Kruger.
An additional tailwind is the potential that some of the proceeds from the two-pot retirement withdrawals could boost retail spending. At the end of October, the South African Revenue Service indicated that 1,7-million individuals had applied for just short of R30 billion worth of withdrawals. These factors combined are likely to contribute to brisk retail spending during November, which also includes Black Friday.
Consumer inflation has moderated from 5.9% in October 2023 to 3.8% in September 2024. The forecast for October is 3.0% y/y, the lowest since February 2021. Headline CPI is forecast to stay below 4% for the next six to nine months, suggesting a sustained period of low inflation, on the assumption of relative rand stability.
Therefore, consumer inflation is forecast to average at 4,5% in 2024 and 2025, aligning with the mid-point of the South African Reserve Bank’s (SARB) 3% to 6% target band, and open more room for lower interest rates in the next few Monetary Policy Committee meetings. Provided no unexpected developments arise locally and abroad, the repo rate is forecast to reach a level of 7.0% by mid-2025 and reflect cumulative relief of 125bps in a fairly shallow cycle.
The potential impact of Donald Trump’s recent victory in the US Presidential Elections is likely to be more of a medium-term factor and should not derail our near-term expectations for interest rate developments in South Africa.
Other economic indicators confirm the unfolding economic recovery. The seasonally adjusted Absa Purchasing Managers’ Index (PMI) at 52.6 points in October 2024 had a second consecutive reading above 50, a first since the positive streak in late 2022 and early 2023, suggesting near-term upside for the manufacturing sector. The S&P Global South Africa Purchasing Managers’ Index (PMI) recorded above the 50 ‘no-change’ mark for a third month in October, signalling a further strengthening of private sector performance. At 50.6, the index was down slightly from September’s 13-month high of 51.0 but still suggests that the private sector remained in growth mode at the start of Q4 with business activity levels on the rise, which firms widely attributed to higher sales and more favourable economic conditions.
Naamsa revealed a strong performance in October, with new passenger car sales powering ahead showing growth of 14,5% y/y, reaching the best month since October 2019 compared to the 1,8% in September. The overall growth in new vehicle sales is also encouraging at 5,5% y/y.
Following two months of lower volumes, the number of transactions cleared through BankservAfrica in October spiked to 167,8-million compared to 156,7-million in September, representing a 7,1% year-on-year growth and an all-time high, according to Naidoo. The standardised nominal value of transactions increased by 1% moderately to R1 317-trillion in October 2024 from R1 303-trillion in September.
“Overall, these favourable conditions are expected to drive a strong year-end finish, particularly in retail spending, bringing a positive boost for the economy,” ends Kruger.