The BankservAfrica Economic Transaction Index (BETI) showed a slight month-on-month uptick of 0,3% in February, but the monthly performance was not enough to help the headline BETI change turn positive as it remained in negative territory.
The headline BETI number stayed at -0,9%, the same as January 2019 based on the difference of a year ago. The fact that the economy continues to remain below trend means that the downswing of the business cycle has now increased to 62 months in length.
The previous most extended downward phase of the business cycle occurred 51 months ago between March 1989 and May 1993. This was before South Africa’s democracy was achieved.
This downward phase of the business cycle is the longest since World War 2. Furthermore, the fact that the South African economic indicators continue to show poor results indicates that recovery will have far more catching up to do than before.
While a downward phase does not always mean a decline in economic output, the BETI indicates that the economy is weak or flat at best, but the lights are still flickering – even if Eskom is not able to deliver all the power it should.
The BETI tracks the domestic South African economy very closely. The current relationship to GDP is R-squared of 0,926. The BETI, however, has a slightly higher connection with gross domestic expenditure, the biggest component of GDP when measuring from the expenditure side of the economy. Here the R squared is now 0,949 which means the BETI explains 95% of the changes in domestic expenditure.
With other early indicators of domestic economic performance, such as new vehicle sales and the Absa Purchasing Managers’ Index indicating a weak February, the BETI at least indicates a small improvement on January’s figures.
Still, this is not enough to counter the declining trend, and with load shedding, one is concerned that the economy is wounded to the point that even small economic shocks could have a more negative impact than usual.
On a year-on-year basis, the nominal value of the average transaction value of the BETI has now recorded 22 months of decline. It seems participants in the domestic economy are either scaling down on the amount they spend despite inflation or more smaller role players, such as micro businesses, are participating in the formal economy via South Africa’s banking system.
The average value of a transaction was R8 224, which was 0,3% less on a nominal basis in February 2019. In real terms, the value per transaction was R7 467 – the smallest amount since the BETI data started in January 2002.
This certainly shows that the national payments system is attracting smaller transactions, which at cost basis terms, shows the system’s efficiency.
The number of transactions increased by 2,4% on a year-on-year basis. This was the 22nd consecutive month of increases for the number of transactions. With February having only 28 days, the number of transactions was under 100 million again but the 98,8-million transactions suggest this may well be the last month of less than 100 million transactions that make up the BETI.
