BUSINESS activity in South Africa ticked up in November as the composite leading business cycle indicator climbed to a three-month high on further easing of lockdown restrictions.
The SA Reserve Bank (SARB) yesterday said that the composite leading business cycle indicator increased by 0.6 percent in November 2021, accelerating from a 0.1 percent rise in October.
This was the second consecutive month of positive reading and the most in three months as six of the 10 available component time series increased, while three fell and one remained unchanged.
This followed a general downward movement since reaching a low-base induced peak in May 2021 which was related to the onset of the Covid-19 third wave.
Lockdown restrictions dropped from level 4 in July to level 2 by the end of September and level 1 in October, spurring activity as businesses are very sensitive to lockdown restrictions.
The SARB said the largest contributors to the increase were accelerations in the six-month smoothed growth rate of job advertisement space and in the six-month smoothed growth rate of new passenger vehicle sales.
The largest detractors, however, were a decrease in the US dollar-denominated export commodity price index and a decrease in the composite leading business cycle indicator for South Africa’s main trading partner countries.
Rand Swiss portfolio manager Viv Govender said it was pleasing to see improvement in the business cycle indicator, but cautioned that it would remain at a lower trend for a long time.
“There are certain countries that we want to emulate such as India and China in terms of growth rates. China is doing 5.5 percent, India is almost 8 percent, the US is looking to do just under 4 percent, and we are struggling to do 3 percent,” Govender said.
“Next year we are going to trend lower and the year after. I think the overall long-term trend for South Africa is going to be about 1.5 to 2 percent.
“Yes, the improvement is good, but we must remember that the overall situation is quite bad, plus the base numbers are quite bad as well. Remember we were obviously depressed by the Omicron variant.”
The composite coincident business cycle indicator fell0 by 0.2 percent in October, as industrial production as well as retail and new vehicle sales decreased.
The composite lagging business cycle indicator rose by 0.3 percent in October.
Investec chief economist Annabel Bishop, however, said the first two months of the fourth quarter of 2021 were still below the leading indicator readings of the third quarter of 2021’s first two months.
“The 11 percent drop in global commodities prices (played) a part in the decline in these comparative periods, as well as a fall in the composite leading business cycle indicator for South Africa’s major trading-partner countries on the feedthrough from the global environment to South Africa,” Bishop said.
“The six-month lead indicates the third quarter of 2023 gross domestic product is less likely to substantially outperform the second quarter of 2023, with the lagged effects of the riots also having a negative impact.”
BUSINESS REPORT ONLINE