Johannesburg - South Africa’s economy, which retreated 1.3 percent in the second quarter, is still in decline.
This is based on the most recent BankServAfrica Economic Transaction Index (BETI), which indicates economic activity over the short-term is in retreat, despite still being positive when compared to a year ago.
BankServAfrica says the index is now at its weakest quarter for the third-quarter when quarter-on-quarter moves are measured. BETI measures monthly transactions and is a close indicator of the economic position, given that its results are almost real-time, while other measures work on a quarterly basis.
The local economy is being hit hard by lower commodity prices, low consumer confidence, and business confidence, measured by RMB. The Standard Bank PMI is also negative, as is the South African Reserve Bank lead indicator.
The 3 percent decline in the BETI comes as consumer confidence remains in negative territory, despite a recent slight gain.
The latest data from First National Bank and the Bureau for Economic Research shows the index recovered slightly in the third quarter of the year after having dropped to a 14-and-a-half-year low in the last quarter.
Although this movement was heartening, the index is still well below the long-term average reading of positive 5. In fact, the index, at negative 5, is currently roughly on par with the lowest reading recorded during the 2008/09 recession, when it hit minus 6.
Other recent data has added to some concerns that SA could be heading for a recession. Now, the BETI says there have been two months in a row when the number of bank transactions has declined.
The BETI is a very fast and broad overview of current economic trends over a range of sectors and makes use of economic transactions as captured by BankServAfrica in its calculations. It covers covers economic transactions across the economy.
Its latest data shows how deep the decline in the South African economy is.
“Three consecutive monthly declines are unusual when an economy is not in decline – this has happened only once in the last four years,” Mike Schüssler, chief economist at Economists dotcoza.
South Africa will technically be in a recession when there is negative growth for two consecutive quarters. “It is highly likely that most people have begun experiencing the effects of the current continuous decline in the economy already,” says Schüssler.
Forecasts from sources such as the IMF and the South African Reserve Bank indicate much slower growth for 2015 and 2016. These predictions are backed up by the BETI, which predicts that the growth forecast may decline further.
IOL