The BankservAfrica Economic Transactions Index (BETI) slipped somewhat in May this year, registering the third decline in the past four months and confirming the flat growth trend in the local economy.
Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements said the BETI slipped to an index level of 132.3 in May compared to 132.7 in the previous month. “On an annual basis, the BETI weakened by a notable 7.4% in May 2023 compared to the revised decline of 3.6% in April.”
The monthly decline in the BETI was said to confirm reservations that the recovery in April would be a sustainable upward trend, while the annual adjustment was off a high base. In May last year, one year earlier, the BETI increased by a solid 3.9% m/m to reach an all-time high of 142.9 at the time, driven by a strong post-Covid recovery.
Elize Kruger, an independent economist said in the past year, the BETI had moved sideways with some volatility from month to month. She said from June last year to May this year, the BETI declined on a monthly basis in nine out of the twelve months, suggesting an economic scenario of stagnation. She added this confirmed the economy remains in a ‘muddle-along-little-thriving’ narrative.
According to the BETI, in May, the economic environment remained challenging. Recent statistics indicated South Africans have spent 27% of the year so far without power, compared to 9.5% in last year. Interest rates have increased again to reach a 14-year high and the rand exchange rate fell to new lows amid policy and political uncertainties. The cost of living remained elevated and the global economic slowdown is still prevalent, it said.
The trends in the May BETI were described as similar to findings from the other nowcast indicators. The Absa Purchasing Managers’ Index (PMI) slipped to 49.2 index points in May and had remained below the neutral 50-level for four consecutive months, signalling stagnation. The S&P Global South Africa Purchasing Managers’ Index - a composite gauge of operating conditions in the private sector economy-dropped to its lowest reading in just under two years in May of 47.9.
On the global front, it said May saw the rate of expansion in global economic activity accelerate to an 18-month high, largely driven by the continued vibrancy of the services sector. Companies reported a further upswing in new order intakes, leading to continued business optimism and solid job creation. The J.P.Morgan Global Composite PMI Output Index rose to 54.4 in May.
Meanwhile, the standardised nominal value of transactions cleared through BankservAfrica last month was R1.18 trillion compared to April’s R1.22 trillion, according to Naidoo. The number of transactions increased from 135.9 million in April to 147.2 million, partly due to more trading days in May.
In previous months, the BETI flagged the potential of a negative quarterly growth rate in the first quarter this year, with the March BETI 1.9% lower than in the quarter ending December last year. However, driven by resilience in the mining, manufacturing and finance sectors, the economy managed to grow marginally in Q1, averting a technical recession. According to Stats SA, real GDP growth increased by 0.4% q/q in Q1 2023 compared to a revised -1.1% q/q in Q4 2022, translating into growth of only 0.2% on an annual basis. While eight of the ten economic sectors recorded positive growth in Q1, growth rates could at best be described as subdued, which tied into the observed trend in the BETI.
Kruger said the economy remained in a muddle-along scenario and was unable to meaningfully alleviate South Africa’s social and unemployment issues.
In her daily market commentary on Wednesday morning, Nedbank CIB research analyst Reezwana Sumad said the rand had continued trading in positive territory, albeit within very limited ranges, over the course of the week thus far; despite local factors, with a test of the R19.00 level remaining a possibility.
BUSINESS REPORT