Leading index shows ‘muddle-along scenario’ for South African economy

 ·14 Sep 2022

The monthly BankservAfrica Economic Transactions Index (BETI), a fast indicator of underlying economic trends in the South African economy, tracked lower levels in August, mirroring the challenging economic environment.

The BETI reflects the standardised value of all economic transactions in the South Africa economy at seasonally adjusted real constant prices.

“The BETI index level moderated further to 131.6, significantly lower than the all-time high of 143.1 reached just three months ago in May. The level in August is also the lowest since the 130.6 reading in December 2021,” said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

On an annual basis, the BETI contracted by 1.0% in August 2022 compared to the revised 5.3% in July. This u-turn in trend can be ascribed to the high base in August 2021, which spiked by 4.3% following the riots in KwaZulu-Natal and Gauteng, affecting the BETI in July 2021.

However, the BETI decline in August 2022 for the third consecutive month signals the ongoing strain on the broader economy, noted the automated clearing house.

“The monthly contraction in the BETI is not unexpected as the economy continues to suffer from recurring load shedding, significant rises in fuel and food prices and further increases in interest rates,” said independent economist Elize Kruger.

“The global economy is struggling with similar headwinds, resulting in an extremely challenging 2022 with weak economic momentum.”

Other local nowcasting indicators have presented a mixed picture of the economy – and a fair dose of monthly volatility.

After plummeting to 47.6 in July – the lowest since July 2021 due to the high intensity of load shedding – the Absa Purchasing Managers’ Index (PMI) rose strongly to 52.1 in August, also partly reflecting the return of vehicle production at the Toyota plant after flooding disrupted activity in April.

The S&P Global South Africa PMI, remained above the 50-level but moderated to the lowest level in three months in August, with the report citing signs of a slowdown in consumer demand.

Total new vehicle sales powered ahead, rising by 14.4% year-on-year in August 2022, still reflecting ongoing pent-up post-Covid demand and a recovery in production. Year-to-date new vehicle sales were a healthy 13.8% higher than a year ago. However, the recently released RMB/BER Business Confidence Index (BCI) for Q3 2022 eased from 42 in Q2 to 39 in Q3.

The FNB/BER Consumer Confidence Index (CCI) clawed back 5 index points to reach -20 in Q3 2022, after plunging from -13 to -25 during Q2. It is clear that consumer sentiment remains extremely depressed, and the report cited that a substantial deceleration in real consumer spending growth could be expected relative to the robust rates recorded at the start of the year.

Meanwhile, the standardised nominal value of transactions cleared through BankservAfrica in August 2022 was R1.144 trillion, while the number of transactions increased to 136.2 million from 130.4 million in July. Despite showing monthly growth of 4.4%, the number of transactions was still 2.1% lower than a year earlier, given the high base of comparison, said Naidoo.

“In the light of the multiple headwinds, it appears the economy is simply unable to gain synchronised momentum across all sectors in the short term, and we will continue experiencing a muddle-along scenario,” said Kruger.

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