Although the positive growth of 0.5% is marginal, it is only the second time in seven months that the economy shows positive growth.
“This is, quite simply put, good news,” says Brad Gillis, CEO PSO (payment clearing house system operator) at BankservAfrica.
“The increase over the last month shows that the economy registered the end to the strikes in the mining and transport sectors and responded by going back to a growth trend. Moreover, the actual index attained its highest level in three months, which is a further sign of hope for the domestic economy.”
Gillis now hopes that further growth will come into the SA economy as the short-term strike damage is hopefully over, enabling the SA economy to break out of stagnation mode.
Looking back at the strikes
Rustenburg has been the fastest growing city in South Africa for much of the last decade and the strikes were particularly damaging to this region – including Carletonville, Brits, Klerksdorp and Randfontein.
The strike in the transport industry, along with the mining strikes, brought a large part of the country to a standstill, causing a loss in confidence.
“The fact that these strikes are over, once again increases some economic activity,” says Mike Schüssler, chief economist at economists.co.za. He does not expect the strike in the farming sector to have as much of an influence on the economy as the strikes in the mining and transport industries did. Schüssler believes it is a matter of numbers – the strikes on farms involve hundreds or a few thousand workers, while the mining and transport strikes involved more than 100 000 workers at its peak.
“The improvement in the December BETI does reflect the fact that the strikes came at a terrible economic cost, as the Governor of the South African Reserve Bank said that the strike action was a self-inflicted wound,” Schüssler says.
The underlying economic trend is of an average to slightly below average growth rate; so once the strike action was over, some of the growth trend came through, giving the economy a little more speed than the stagnation of the last few months
“The international environment is still a difficult picture, but even here there are signs of hope,” says Schüssler.
Upward trend needs confirmation
The December BETI is, however, still declining on a quarterly basis, showing that the slight pickup needs much more confirmation over the next few months if a turnaround in trend is to establish itself.
Contact Gerian Miller for more information: GerianM@bankservafrica.com or (011) 497 4067.
BankservAfrica’s index shows a slowdown, a decline and a little pickup
The BankservAfrica Economic Transaction Index (BETI) for December offers consumers a potluck of good and not-so-good news, as it shows signs of recovery in the midst of a slowing trend.
The BETI slowed to an annual growth rate of 1.8%, which indicates that the recent slowing trend is continuing. At the same time the latest month-on-month data signals a gentle pick-up of 0.5%, which is only the second monthly increase in seven months.
Measuring the economic temperature
The BETI is a transaction-based, broad measure of the South African economy, explains BankservAfrica’s CEO for PSO (payment clearing house system operator) Brad Gillis. “It offers a quick way to measure economic activity across most of the South African economy, much faster than traditional economic indicators. Although too broad to be sector-specific, it can be used as a guide to current economy activity.”
Not yet enough to turn the tide
The not-so-good news regarding latest figures is that the month-on-month increase for December is not enough to turn the trend of the annual BETI from showing a further slowdown.
Furthermore, explains chief economist at economists.co.za Mike Schüssler, the December BETI also shows a quarterly decline.
“This means the slight pick-up needs confirmation over the next few months if a turn-around in trend is to establish itself. However, even if it is confirmed, the pick-up probably does not translate to more than 3% growth for the South African economy – but, at this point, even 3% is better than the stagnation that the longer trend still indicates.”
Predicting fourth quarter growth
The BETI has shown six months of decline on a quarterly basis, as the weaker world environment combined with wildcat strikes to damage the South African economy.
The year-on-year growth of 1.8% indicates that growth in the fourth quarter is unlikely to be much better than the third, as the quarter-on-quarter data is still showing a declining trend.
The BETI data also indicates that, even with the recovery, the fourth quarter GDP is likely to be weaker than the third, but still not negative. Although stagnation in large parts of the South African economy is still the order of the day, there are glimpses of sunshine through the rain clouds.
Gillis says this month the BETI is based on 82.5 million transactions across the economy. “Excluding POS (point-of-sale) and salary transactions, the BETI represents around 40% of all economic activity. The raw data represents over R605 billion in transactions for the month.”
