The negative impact of the July’s civil unrest has been forecast to ring into next year as economic activity recovers slowly from business disruptions.
The composite leading business cycle indicator, released by the SA Reserve Bank (Sarb) on Tuesday, ticked up slightly by 0.7 percent in August, rebounding from a downwardly revised 2.4 percent drop in July.
The leading indicator provides insight on economic activity in six months’ time, and the August modest rise showed how constrained the business environment remained.
The Sarb said four of the 10 available component time series increased, outweighing decreases in the remaining six component time series as economic activity picked up somewhat.
The largest positive contributors were accelerations in the six-month smoothed growth rate as the number of new passenger vehicles sold recovered, as did job advertisements and growth of the real M1 money supply.
On the other hand, the largest detractors were drops in the average hours worked per factory worker in manufacturing and in the US dollar-denominated export commodity price index.
In July, only the number of building plans passed was positive, with plans made and submitted in advance, but in August it contributed a negative impact to the leading indicator.
The Sarb also said the composite coincident business cycle indicator fell by 2.7 percent in July. This was due to the negative impact of the civil unrest, port terminal disruptions and level 3 lockdown restrictions, which was reflected in retail and new vehicle trade sales, and industrial production.
The composite lagging business cycle indicator also eased further by 1.6 percent in July.
Investec chief economist Annabel Bishop said the leading indicator reached 133.2 points in the second quarter, but then collapsed back to around 127 points in the third quarter as the negative impact on activity drove the business cycle lower.
“Furthermore, the negative impact of July’s unrest will stretch into next year, as the leading indicator also shows today, with the data coming out currently indicating a drop in economic activity in the second quarter of 2022 versus the first quarter of 2022,” Bishop said.
“That is, the pick-up in August was insufficient to counteract the collapse in the economy in July, and September is not showing sufficient momentum in data released so far.”
BUSINESS REPORT ONLINE