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Johannesburg – South Africa’s economy seems to be slowing as manufacturing production, retail sales and the Trade Expectations Index are all down.

However, BankservAfrica’s latest Economic Transaction Index (BETI) for March reflects stronger domestic economic activity with real gains reflected on a monthly – and quarterly basis.

On Wednesday, Statistics SA said retail sales, measured in constant 2011 prices to strip out inflation, declined 1.7 percent year-on-year in February 2017.

Negative annual growth rates were recorded for those selling clothing, furniture and white goods, as well as those in the hardware sector.

Stats SA says the main contributor to the decrease was retailers in textiles, clothing, footwear and leather goods.

Measured on a month-on-month basis, retail sales gained 0.8 percent, Stats SA says, although sales were also down quarter-on-quarter.

This is despite the three-month period holding the traditional bumper months of December and January, when festive season shopping and back-to-school usually leave tills ringing.

Meanwhile Tuesday figures from the statistics agency showed manufacturing production dropped precipitously in February, declining 3.6 percent year-on-year (the worst point since July 2014, which was strike related, FNB pointed out) and 0.4 percent lower month-on-month.

Read also: Manufacturing data hints at recession

This was in sharp contrast to January’s positive, albeit meagre growth of 0.4 percent year-on-year, FNB Senior Economist Jason Muscat noted. Muscat said, based on manufacturing data, there was a possibility of a technical recession as SA’s economy contracted 0.3 percent in the December quarter.

A technical recession is two consecutive quarters of contraction. SA’s gross domestic product is expected by most sources to grow at about a percent this year after a measly 0.3 percent gain in 2016.

Muscat said a first quarter recession would not have been the result of the recent cabinet reshuffle or the ratings downgrade, which suggests that there may be further contractions in the coming quarters given our expectations of lower business and consumer confidence in light of heightened political uncertainty.

Trade expectations

Meanwhile, the seasonal adjusted six-month Trade Expectations Index (TEI) weakened notably and declined from 61 in February to 51 March 2017 – the weakest level since April 2016, the South African Chamber of Commerce and Industry said on Wednesday.

With such indices, anything below 50 indicates a negative outlook by those surveyed.

SACCI notes the TEI was on a strong path of recovery from May 2016 up to February 2017.

“However, due to extraneous events, all components of trade expectations were severely and negatively affected in March 2017.”

The chamber also points out that 44 percent of responses were in before the March 27 recall of then Finance Minister Pravin Gordhan. Gordhan was subsequently axed and replaced by Malusi Gigaba, who was seconded from Home Affairs.

His departure left the JSE reeling and the rand has lost 10 percent since he was recalled from the international investment roadshow to the US and UK. SA was subsequently downgraded to junk by S&P Global and Fitch, both of which cited uncertainty caused by the Cabinet shuffle.

“The March 2017 Survey may therefore not reflect the full short-term impact of the political developments of the last few days of March 2017. The subsequent downgrade to junk status by Standard and Poor’s and Fitch will also have longer-term repercussions for trade conditions,” says SACCI.

Meanwhile, BankservAfrica’s latest Economic Transaction Index (BETI) for March may be a bright spot amid the negative indices. Its near-cast – making it closer to real time than other indexes –stronger domestic economic activity with real gains reflected on a monthly – and quarterly basis.

“The BETI improved month on month by 0.7 percent in March – the third consecutive month of positive growth,” says Dr Caroline Belrose, Head of Information Services at BankservAfrica.

The monthly improvement – though slower than that experienced between February and January – confirms for BankServAfrica that the economy is on the road to recovery. This was supported by the quarter-on-quarter changes where the BETI improved by 2.7 percent the strongest quarterly growth since April 2016, it says.

“The speed of recovery from the weak fourth quarter of 2016 suggests that the first quarter of 2017 had good GDP growth,” says Mike Schüssler, Chief Economist at Economists dotcoza.

BankServAfrica says, while green shoots are starting to grow, it’s unclear how recent political and economic developments in South Africa may change this.