South Africa’s economy is expected to slow after relatively strong growth late last year, according to a new economic index released on Thursday (15 March 2012).
“In the next few months, expect more evidence of a slowdown as more and more data is going to point that the South African economic expansion is losing steam,” said Mike Schüssler, chief economist with economists.co.za.
The newly-launched BankservAfrica Economic Transaction Index (Beti) shows that year-on-year growth for February was around 3.8 percent — down from 4.1 percent for the year to January 2012.
The Beti is a collaboration between BankservAfrica and Schüssler. The figures show that the economic growth rate has slowed over the last five months, with the three-month smoothed Beti showing a growth rate of only 3.4 percent.
“The point is that the worldwide slowdown is also being felt in the South African economy. However, unlike many developed countries, South Africa still has positive growth,” said Brad Gillis, BankservAfrica regulated business CEO.
Schüssler said the index predicted economic growth of no more than three percent in the rest of the first quarter, possibly even less.
“We believe that until the smoothed Beti sees a trend reversal of over 4.5 percent it is unlikely that the expansion will pick up momentum again. But, similarly, until the smoothed Beti goes below one percent it is unlikely that the South African economy will be in a recession.”
Schüssler warned the next two quarters would not be easy.
“The economy is still growing. We have hit a bit of a speed limit. The speed limit may fall away again, but we think the Beti shows we have hit a suburban speed limit. It will probably be some time before we reach highway speeds again.”
The Beti draws on data from BankservAfrica which records transactions between banks, either electronically or paper based cheques. The indicator tracks close to 80 percent of all economic transactions, besides debit and credit cards and cash.
Over the last year the Beti represented 844 million transactions with a value of over R6.3 trillion.
“Economic transactions make up the economy, and their rise and fall (after taking away the effect of inflation) would give South Africa a very good idea as to where the economy is headed,” Schüssler said.
He estimated the Beti could represent about one-third of all economic transactions, by value.
“The Beti has a very good correlation with GDP growth as well as the co-incident indicator of the South African Reserve Bank (SARB).
“However, unlike GDP which is released quarterly with a six-week lag, the Beti is released monthly with only about a 14-day lag. At times the Beti will give an indication of the overall economic cycle up to three months in advance,” Schüssler said.
“Whilst the BankservAfrica Beti is slightly more volatile, it does give the broadest possible explanation of what is happening currently in the overall economy.”