South Africa’s economy is doing better than many expected

 ·20 Jun 2022

The local economy bounced back in May 2022 after experiencing some moderation in the previous month, the latest figures in the monthly BankservAfrica Economic Transactions Index (BETI) show.

“The BETI increased by a significant 9.9% in May 2022 compared to a year ago to reach the highest level since August 2021,” said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

“The May reading was also a substantial improvement on the 4.9% – revised from 4.5% – recorded in April.”

Following revisions to the seasonal factors, the actual index level reached an all-time high at 143.5. The strong number was unexpected in light of the many headwinds that surfaced in the local economy over recent weeks.

“The recent BETI figures suggest that the underlying momentum in the economy might be stronger than generally perceived, even stronger than being reflected in other nowcasting indices,” said independent economist Elize Kruger.

PMI and other improvements 

On another positive note, the Absa Purchasing Managers’ Index (PMI) increased to 54.8 index points compared to 50.7 in April, suggesting a partial recovery in the manufacturing sector. This sector was particularly hard hit by disruptions following the devastating flooding in KwaZulu-Natal in April.

The S&P Global South Africa PMI, which reflects activity in the broader economy, also recovered marginally in May, from 50.3 in April to 50.7, while new car sales rose by 13.8% y/y in May 2022. By the end of May, the total new vehicle sales in SA stood at 212 537 units, 12.2% higher than a year ago.

The strong commodity price levels, recent job creation and the relaxation of the Covid-19 restrictions on gatherings are some of the factors that have cushioned South Africa’s economy from the negative forces of the intermittent load shedding, higher fuel prices, and rising inflation and interest rates. Furthermore, the tourism, hospitality and accommodation sectors have also been supported by the reopening of the economy.

According to Naidoo, the standardised nominal value of transactions reached an all-time high of R1.229 trillion in May 2022. The number of transactions remained elevated at 132.9 million, the third-highest number yet recorded in a month and 15.7% higher than a year ago.

As forecasted by the late BETI economist, Mike Schüssler, South Africa’s Q1 2021 GDP growth indeed came in higher than the market consensus. At 1.9%, this grew at the fastest rate since Q2 2021.

In Q1 2022, the economy also recovered to its pre-COVID production level, but notably lags in comparison to the other emerging and developing countries.

“The strong May 2022 BETI signals a continuation of the strong growth performance of Q1, which would be an encouraging outcome for an economy in dire need of sustained growth that could, in time, lead to more job opportunities and a dent in the highest unemployment rate in the world,” said Kruger.

Read: Eskom sends load shedding warning to South Africa – high risk ‘for the next few weeks’

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