Things don’t look good for South Africa as economic activity declines in October

Economic transactional activity in South Africa declined for the second consecutive month in October – and it is likely to continue to do so with confidence levels in the economy dropping.

This is according to the latest BankservAfrica Economic Transaction Index (BETI) for October, which gives an economy-wide picture of activity across South Africa, showing transactional values declined again on a month-on-month basis in October. This was also evident on a quarter-on-quarter basis.

“Despite October having more weekdays than most months this year, economic transactions still declined, indicating business and consumer confidence is still lacking in the economy,” said Mike Schüssler, chief economist at Economists dotcoza.

“The declining transactional activities reflected in the BETI for September and October are concerning for SA’s main economic drivers. Already the data so far for October shows manufacturing is still declining,” he said.

“Although the additional days (in October) contributed to a slight improvement for car sales, these were still flat when compared to other months. The drought in the Western Cape and parts of the Northern Cape have had further negative impacts on the South African economy.”

The BETI is an indicator of economic performance expectation, which is reflected in the September and October performance as well as quarterly.

Worryingly, the downward movement seen in the most recent period may become more pronounced in the following months, with October’s Medium Term Budget Policy Statement (MTBPS) showing early indications of higher taxes, bigger trade deficits and an economy at risk.

The lowered BETI in the past two months point to broad declines in the economy in real seasonally adjusted terms. Both of these suggest another fall in the South African economy and the real possibility of the GDP declining on a quarter-on-quarter basis.

Should this happen, it will be the sixth GDP decline since 2011, BankservAfria said.

On a year-on-year basis, the BETI is still up by 0.8%, in line with the expected GDP growth of rate a year ago. In contrast to the real decline in the BETI, the average size of the economic transactions increased to R8,632, which is up sharply up from September 2016 when it was unusually low.

Read: The average take-home salary in South Africa right now

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Things don’t look good for South Africa as economic activity declines in October