The BankservAfrica Economic Transaction Index (BETI) reflected a negligible month-on-month and year-on-year increase for March in what Economists.co.za chief economist Mike Schüssler says is a sign that the economy has stagnated.
The index, which measures the South African interbank payment system’s transactions that are smaller than R5 million, was up 0.4% from February, while the year-on-year increase was 0.8%.
Schüssler says March was a slow month, not only because of the public holidays and an early Easter period, but also because it had come off a particularly high base in February, when the index had its strongest month-on-month performance in over five years.
“Growth is the exception and not the rule. We are still in a weak economy. Apart from February this year, and October and February last, we’ve had no strong growth months. All the months have either been negative or flat,” says Schüssler.
He adds that he had expected the exceptional transactions’ performance in February to translate into a stronger performance for March than has been the case, as more people/companies would have had more money following that month. But it was not to be.
Dr Caroline Belrose, head of knowledge and risk services at BankservAfrica says the the number of transactions grew by 3.7%, but that the average value of the transactions declined by 1.1% to R8 451. Meanwhile the total actual transaction value was up 2.5% in nominal terms.
Schüssler believes South Africa is in a typical period of stagnation, as economic growth remains weaker than population growth, meaning the average person is getting poorer.
For the individual, he says the current situation can be viewed as a recession, even though, for the country as a whole, we’re in a flat economy.
“My feeling is that there is no traction. Every time we have a great month, it just peters out. A great month becomes a flat month, and then you get a negative month again. It’s really one step forward, one step backward.”
He adds that he expects GDP figures to be much lower than what many expect because, even though it might not be negative, the current trend paints a picture of an “economy that is fighting just to stay close to the zero line”.
As inflation remains high, Schüssler says the deflator in the economy is going to become much higher and that this is going to have an impact on GDP accounting, which could put us into negative territory. Specifically, if inflation goes beyond 7% for April and/or May it becomes more likely that there will be negative growth.
Says Schüssler: “Because we keep on seeing nominal GDP growth of between 6.5% and 7.5% in the economy, and if you then take a deflator of around 7%, that means that you’re pretty much in the middle. The higher you go over 7%, the more likely you are to see a declining economy.”