South Africa economic scorecard points to headwinds

The BankservAfrica Economic Transactions Index (BETI), a fast indicator of underlying economic trends in the South African economy, slowed somewhat in June following a strong reading a month earlier in May.

Despite this movement, the index’s figures suggest – even with the expected headwinds – there is still economic growth on the cards for South Africa in the second quarter of 2022, according to the clearing house.

“The BETI for June 2022 moderated to 5.3% higher than a year ago, which was down significantly from the 9.4% in May 2022,” said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. “This could be an early sign of further and impending strain on the economy.”

The actual index level moderated to 136.7 in June, following an all-time high of 143.0 in May.

“The moderation in the BETI is not unexpected in light of the many headwinds that have surfaced in the local economy over recent weeks – from the recurring load shedding to the significant rise in fuel, food and general inflation increases,” said independent economist Elize Kruger.

“Yet, despite these developments, the index still suggests the underlying momentum in the economy might have been stronger than generally perceived in Q2 2022 as a whole. The BETI still increased by 3.9% compared to the previous quarter.”

Other nowcasting indices represented a mixed bag for June. Similar to the BETI, the Absa Purchasing Managers’ Index (PMI) moderated to 52.2 index points compared to 54.8 in May, suggesting a partial recovery in the manufacturing sector following the impact of the devastating flooding in KwaZulu-Natal in April and ongoing load shedding, said BankservAfrica.

In contrast, the S&P Global South Africa PMI, which reflects activity in the broader economy, recovered in June, from 50.7 in May to 52.5, the highest index level in just more than a year. New passenger car sales powered ahead, rising by a significant 20.6% year-on-year in June 2022, probably reflecting pent-up post-Covid demand.

The latter two indicators confirm the BETI’s forecast that the country’s GDP growth in Q2 could indeed emerge stronger than the market’s expectation, it said.

A number of factors have mitigated and cushioned the South African economy from growing negative forces, said Kruger.

Although off their peaks, many commodity price levels have remained elevated given the impact of the ongoing conflict between Russia and Ukraine. These high price levels continued to support the mining sector and others such as transport. Further, there has been some job creation in Q1 2022 with the number of employed people increasing by 370,000.

“This will likely boost consumer spending in subsequent quarters, in combination with the extension of the R350-a-month social relief of distress grant to the FY23 fiscal year.”

BankservAfrica noted that the relaxation of Covid-19 restrictions on gatherings has benefitted many industries as the continued re-opening of the economy and further easing of international travel regulations has provided welcomed relief to the tourism, hospitality, and accommodation sectors.

“With all remaining Covid regulations repealed on 20 June, a further recovery towards pre-Covid activity levels in some sectors (where restrictions still applied), will support general economic activity in the coming months,” said Kruger.

Naidoo said that the standardised nominal value of transactions cleared through BankservAfrica in June 2022 was recorded at R1.121 trillion. This is as the number of transactions remained elevated at 127.57 million and 10% higher than a year ago, said Naidoo.

With all of these movements and the latest transactional data of economic activity, the BETI, therefore, increased by 3.9% on a quarterly basis. This signals a continuation of the strong growth performance of Q1.

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