Reserve Bank says leading indicator increases
JOHANNESBURG - The South Africa Reserve Bank (Sarb) yesterday said that its composite leading business cycle indicator increased 0.5 percent on a month to month basis in November 2019, as six of the 10 available component time series increased while four decreased.
The indicator lifted to 104.4 from 103.9 in October, and a reading of 103.2 in September 2019.
In August, the indicator The South African Reserve Bank's (Sarb's) composite leading business cycle indicator moderated modestly, driven by decline in the export commodity price index and a deterioration in business confidence.
It dipped 0.1 percent month-on-month to 103.8 in August from 103.9 in July.
Sarb said decreases in five of the 10 available component time series marginally outweighed increases in the remaining five.
Yesterday, the central bank said the largest positive contributions to the movement came from an acceleration in the twelve-month percentage change in job advertisement space, and an improvement in the Bureau of Economic Research’s Business Confidence Index.
The largest negative contributions came from a decrease in the number of residential building plans approved, and a deceleration in the six-month smoothed growth rate in the real M1 money supply.
Last month, the government announced moves to stabilise the security of the country’s power supply by resuscitating the Energy War Room at Eskom and acquire additional electricity from independent power producers (IPPs) following 10 days of devastating power cuts.
Investec chief economist Annabel Bishop said the move to support both private sector energy producers and renewable energy feeding onto the grid was a positive development.
Bishop said the announcement by President Cyril Ramaphosa that State officials and managers must possess the right financial and technical skills and other expertise.
She said the third quarter 2020 could see an improvement in economic activity over the second quarter 2020 since the leading indicator lifted for two months.
“The around six-month lead indicates Q3.20 GDP is on track to see a more healthy performance than that of Q2.20,” Bishop said.
“Improvements in Q2.20 GDP growth would dovetail with the lift in private sector fixed investment that occurred notably from Q2.19 as the lags before the additional productive capacity fully bears fruit for the economy can take over a year.”
Bishop said the upward trend in the leading indicator could be expected to remain sustainable at these levels in light of sluggish global economic activity.
“SA’s business cycle leading indicator may prove patchy at times but an upwards trend is expected to become more sustainable, particularly as global economic activity could improve this year,” she said.