BankservAfrica points to further slide in GDP

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Associated Press

File picture: Denis Farrell

Johannesburg - Before the risk of slipping into recession had been backed by hard facts, economic transactions tracked by BankservAfrica started showing that South Africa would probably record a further gross domestic product (GDP) decline this quarter.

The BankservAfrica economic transaction index (Beti) released yesterday broke beneath the zero line in May and stood at minus 0.2 percent. The index represented the first year-on-year decrease in four years.

“Although monthly indicators are known for volatility, this isn’t a one-month trend. The problem is; four out of the last eight months have been negative. It looks like GDP growth will slow to 1 percent or less in this quarter,” Mike Schüssler, the chief economist at economists.co.za, said.

He said he was “80 percent certain” that South Africa was in a recession already, but the government was a bit more optimistic than the private sector, something he reckoned was “the right thing to do”.

Schüssler has been working with BankservAfrica for the past two years in compiling this index. The Beti tracks all electronic and cheque transactions below R5 million between different banks in the country.

BankservAfrica defines it as a near-casting indicator, meaning that indicators from the Reserve Bank could take another month to reflect this economic activity dip.

The company said, based on its data, it was expecting the Reserve Bank’s co-incident indicator to decline in the next three or four months.

“There is no ‘golden rule’ between the Beti and GDP growth in exact terms, but with a correlation of 0.997 it is clear that the year-on-year GDP growth will decline from the first quarter by 1.6 percent, especially given the historical connection between both the actual Beti and GDP growth rates,” BankservAfrica said in its report.

In the first quarter, the economy contracted by an annualised 0.6 percent, the first contraction since the 2009 recession.

Schüssler said the economy lost its growth momentum not only because of the platinum sector strike, but consumers’ debt concerns, the changes in export territories, the significant drop in car sales and manufacturing purchasing managers’ index were contributing to the decreased economic transactions.

BankservAfrica said what posed more risk was the fact that the Beti had not reached the bottom of its decline yet, something that normally happened after a big strike ended. This happened in both 2012 and last year.

This year, the platinum-belt strike is still going strong, while other potential and actual strikes come to the fore as the bargaining season begins.

Last month, the number of transactions was 84.2 million, which is the third highest on record, but the actual monetary value of all the transactions grew by 1 percent before adjusting for inflation. This meant that the average value per transaction was falling even in nominal terms.

BankservAfrica said the data showed that the 2.5 percent increase in transaction volumes might have been a result of other spending obligations rather than an increase in actual economic activity.

But after seasonal adjustments to the Beti, taking into account inflation and the number of workdays last month compared with the previous May, the economic transactions amounted to R655.6 billion, up 7 percent from a year ago. - Business Report


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