Economic transactions stall in January

The BankservAfrica Economic Transaction Index paints a bleak picture of the economy, as economic transactions are flat in January.

Johannesburg - The latest BankservAfrica Economic Transaction Index paints a bleak picture of the local economy, as economic transactions only grew 0.1 percent in January.

Based on these results, the index points to South Africa attaining almost no growth this year.

The index seems to bear out the World Bank’s forecast for SA’s growth coming in at 0.8 percent this year. The new growth forecast is a drop from the bank’s previously expected 1.4 percent.

In addition, as the bank lowered next year’s projection to 1.1 percent from 1.6 percent, it also warned SA’s economy was “flirting with stagnation if not recession” earlier this year.

Commenting on the BankservAfrica Economic Transaction Index, Mike Schüssler, chief economist at Economists dotcoza, says it is certainly too early to say that South Africa is in recession, yet the number and value of transactions recorded by the index show a sustained slowdown over most of the last year, and certainly also over the last few months, indicating that the economy is weak.

Factors influencing the slowing economic activity include the weaker rand, drought and a decline in foreign tourists. Declining new car sales and subdued manufacturing figures confirm the negative picture.

Consumers have been hard hit by the plunge in the value of the rand, stubbornly high fuel prices and a prime lending rate that moved from 9.75 percent to 10.25 percent in January.

Also read: World Bank cuts SA growth forecast

The index also noted quarter-on-quarter and month-on-month measurements of economic activity are also down.

BETI is a fast and broad overview of current economic trends over a broad range of sectors, making use of economic transactions as captured by BankservAfrica. It is considered a “now-cast” number as a result of its speedy ability to convey the overall economic conditions to the market. Where most economic indicators can take anything between 38 and 76 days to become public knowledge, now-cast indicators take less than a month after the event to come to the market.

“The slowdown is now not only well established but most recent quarterly and monthly changes are indicating further declines are increasingly likely,” says Schüssler.

“This picture was possibly worsened by the month ending on a Sunday, meaning some month-end transactions may have been delayed to the beginning of February. But overall the BETI is still showing a declining trend,” he adds.

While the previous months’ numbers were slightly more positive when compared to January 2016, a month-on-month decline was still evident. However, the speed of this decline increased steeply from negative 0.1 percent in December 2015 to negative 0.4 percent in January 2016.

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