There is hope for South Africa’s economy
Monthly improvements in the BankservAfrica Economic Transactions Index (BETI) for June suggest that the South African economy has performed better than expected in Q2 2023.
The BETI shows the standardised value of all the economic transactions in the South African economy at seasonally adjusted real prices.
The BETI jumped from 132.2 in May to 133.6 in June, the highest level since July 2022.
On an annual basis, the BETI in June is still in negative territory; however, it has seen improvements from the prior months.
The BETI declined 7.4% in May but only declined by 2.0% in June, with a low base cost calculation contributing to the annual improvement.
“Although the index has been choppy in recent months, moving mostly sideways in the past year, the recovery in June is encouraging and reflects the positive impact of a few specific factors in the economy in June,” Elize Kruger, an Independent Economist, said.
The severity of load shedding declined significantly in June as Eskom only shed 712 GWh, far lower than the 2,042 GWh shed in May, which helped several sectors in the economy.
Moreover, many sectors have also implemented alternative energy sources and are more resilient against load shedding.
The major moderation in Consumer Price Inflation (CPI) from 7.1% in March to 5.4% in June also positively affected the index’s performance in real terms.
June’s inflation reading is now within the Reserve Bank’s target range of 3% to 6% for the first time since April 2022.
“The moderation in consumer inflation will go some way in reducing the extent of the erosion of purchasing power that households have had to deal with, especially in the past year,” Kruger said.
That being said, not all nowcast indicators reflected optimism.
For instance, the Absa Purchasing Managers’ Index (PMI) slipped from 49.2 index points in May to 47.6 in June, which signals a stagnation in the manufacturing sector.
Although the S&P Global Purchasing Managers’ Index – a gauge of operating conditions in the private sector – increased from 47.9 in May to 48.7 in June, it is still in contracting territory, despite firms saying that decreased load shedding helped them to increase working hours and complete outstanding orders.
Still, domestic vehicle sales exceeded expectations in June, despite the high-interest rates, severe unemployment levels and higher price challenges.
Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements, said that the standardised nominal value of transactions cleared via BankservAfrica increased from R1.18 trillion in May to R1.21 trillion in June.
The number of transactions did, however, moderate from 147.2 million in May to 145.2 million in June.
Overall, BankservAfrica said that the BETI is signalling a positive growth rate for Q2 2023, with the June BETI 2.6% higher than in the quarter ending March 2023.
“With many economic challenges remaining, and as the possibility of elevated load shedding levels for winter remains, the improvement in the BETI is not necessarily the start of a sustained synchronised economic recovery, but it indeed signals that the economy has probably fared better in Q2 than initially expected,” Kruger concluded.
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