SA’s longest downward phase since the 90s appears to be coming to an end: economists
The second longest downward phase of the South African business cycle appears to be coming to a close, according to new data published on Wednesday (11 April) by BankservAfrica and Economists.co.za.
The data shows that if the current downward phase of the local economy (which according to the South African Reserve Bank began in December 2013) is still deemed to be underway in March 2018, it will set a new record of 52 months – longer than the period of 51 months set in the early 1990s.
“Long-term average and potential growth during the downward business cycle phase was sub-standard for a protracted period,” BankservAfrica said.
“This has had an impact on job creation and on other economic drivers. Central banks would usually decrease their interest rates in this part of the cycle. The SARB, however, cannot decrease interest rates as much as they would like to.”
“While the exact date of the start of a new upward phase is not clear yet – and will not be for some time – real growth, as seen in the BankservAfrica Economic Transaction Index (BETI), has been positive since July on a year-on-year basis, and increased above the 3% level since December 2017,” it said.
On the up
In March 2018, the BETI increased by 3.4% on a year-on-year basis.
In addition transactional activity, as highlighted by the BETI, has strengthened over the last months, suggesting an imminent upward turn to the economic cycle.
With five months without declines and four months with quarter-on-quarter increases, these movements reveal the economy is turning the corner. The BETI increased by 0.4% on a month-on-month basis. On a quarterly basis, this change was 0.3%.
These changes are amplified by the increased positive sentiment in the financial markets in the form of lower interest rates and bond yields, which are also influencing business and consumers for the better, BankservAfrica said.
“The real value and volume of economic transactions that make up the BETI are all at record levels,” it said.
“This is also the first time that the actual number of transactions increased to over 100 million for a month. The number of transactions increased by more than 6% on a year-on-year basis for nine months in a row. The last three months showed growth of over 9% in the number of transactions.”
“While April can be expected to be a bit quieter, the March numbers confirm that economic growth is still firm across all measurement periods,” it said.
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