BankservAfrica has published its latest Economic Transaction Index (BETI) for September 2019, showing how the country’s economy is taking a grim turn ahead of National Treasury’s mid-term budget policy statement (MTBPS).
The index tracks the entirety of interbank payments in South Africa and has a high correlation to the South African gross domestic product, suggesting that the country is facing an economic growth slowdown.
For September, it recorded 0.5% year-on-year growth with declining quarterly and monthly changes for the real value of transactions.
However, the BETI declined by 1.6% between September and August 2019 – the most significant month-on-month deterioration since April 2018, the group said.
The quarter to September compared to the quarter to June contracted significantly with a 2.2% decline between both quarters, representing the largest quarterly decline since June 2018.
“This sizeable fall is the most reliable indication that the economy may have fallen back into contraction,” BankservAfrica said. “It also indicates the South African economy is affected by weaker global growth and reduced domestic demand in sectors such as vehicle sales.”
“The latest economic data shows that the minister of finance will have less room to increase government spending and make provision for tax decreases when he delivers his MTBPS at the end of October.”
The Standard Bank Purchasing Managers’ Index (PMI) produced by Markit has shown five consecutive months of decline while Absa’s Manufacturing PMI reported the steepest drop in a decade.
Overall vehicle sales remained lower than a year ago. The economy’s main confidence indicators remain in negative territory.
Business confidence fell to the lowest level in over two decades with South Africa’s main business role players sharing the sentiment that inaction by leadership is costing the economy.
The BETI data also suggests that the downward phase of the business cycle has reached 70 consecutive months.
In this period, population growth remained higher than economic growth, indicating that the economic stagnation is reducing average South African incomes.
“While it is not guaranteed at present, the BETI suggests the South African economy could be in another contraction period. According to the trend in the BETI data, SA’s Q3 2019 GDP has an 80% chance of a decline,” the group said.