The BankservAfrica Economic Transaction Index (BETI) showed growth of 2.4% on the past year, surface evidence that economic activity is fairly stable. However, the growth is off a low base, following the impact of the strike season in July last year, which hit the South African economy hard. “The headline BETI number therefore hides a decline in economic activity in July 2015 as both quarter-on-quarter and month-on-month activity decline,” said Mike Schüssler, Chief Economist at Economists dotcoza. “The decline however is just not as much as July 2014, making the annual increase the largest in two years.”
The BETI remains extremely volatile, with three of the last six months indicating declines and the others showing increases.
The harsh reality of lower commodity prices and power shortages indicate a declining start to the second half of the year for the South African economy, Schüssler added.
“The economy is on something of a wild rollercoaster ride, and there is no hiding the fact that activity is fluctuating with the short term up-and-down nature showing a clear lack of real direction.”
As a co-incident indicator, the BETI has a close relationship with Gross Domestic Product which indicates that while quarterly growth in the economy should be weak, the annual change should still be around 2%.
Most of that growth however was in the fourth quarter of 2014 which, impact aside, had a 4% annualised change. Activity measured by economic transactions via South Africa’s payments operator BankservAfrica has been very volatile over the last two years, indicating uninspiring economic performance.
“All this mercurial activity indicates that the only stable trend is very weak growth. The increasing risk from lower commodity prices and infrastructure constraints indicates a higher likelihood of even weaker growth or indeed decline,” says Schüssler.
“Economic activity changes with no clear trend make for risk reduction decisions. But this in itself can lead to even lower growth in the economy. Other economic indicators also paint a mixed picture with the PMI indicating slow growth compared to declining vehicle sales.”
The actual number of transactions via the BankservAfrica system - as measured by the BETI - shows a 2.1% increase over the year to R86.3 million. The average value per transaction grew at 5.4% in nominal terms to R8 433 per transaction.
The standardised value of the BETI transaction increased by 7.5% on a year ago to R693.45 billion for July 2015, while the standardised transaction value in June 2015 totalled R709.6 billion, indicating the volatile nature of economic activity within South Africa at present.
The BETI may seem stronger but the headline growth is effectively built on quick sand, Schüssler added.
