Drop in economic transactions signals SA’s deteriorating economic activity

The drop in economic transactions in February signals South Africa’s deteriorating economic activity with continuing rolling blackouts and interest rates and inflation remaining at elevated levels in addition to the global economic slowdown.

The BankservAfrica Economic Transactions Index (BETI) fell in February 2023, after two consecutive months of encouraging growth. The BETI reflects the standardised value of all economic transactions in the South Africa economy at seasonally adjusted real constant prices.

“At an index level of 131, the BETI for February slipped to October’s level and declined by 1.3% on a monthly basis, unlike the increases of 1.4% in December and 0.4% in January,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements. The February BETI was 1.9% lower than in February last year.

ALSO READ: Another BETI downturn in October shows ongoing strain in local economy

Elize Kruger, independent economist, says this notable moderation in the BETI reflects the pressures that businesses in the country’s main economic sectors experience from the prevailing dismal economic context.

“Stats SA data, indicating the economy contracted by 1.3% in the fourth quarter of 2022, illustrates the impact and cost of rolling blackouts. Retailers also shared their predicted losses and costs due to trying to operate as usual during severe blackouts. Ultimately, these cost increases will likely be passed on to the end product price, fuelling consumer inflation or leading to lower margins.”

Mixed performances in economic transactions

Other indicators recorded mixed performances in February, with the Absa Purchasing Managers’ Index plummeting to 48.8 index points in February, while the sub-index measuring expected business conditions in six months fell to its lowest since May 2020.

However, the S&P Global South Africa Purchasing Managers Index signalled that economic activity in the private sector stabilised in February, after contracting for five months in a row as companies reported a slight recovery in purchasing levels, although input cost inflation accelerated to a seven-month high.

The pace of vehicle sales growth moderated further in February, but remains 2.8% higher than a year ago. The global manufacturing downturn showed signs of easing at the start of 2023, according to the latest J.P.Morgan Global Manufacturing PMI™, but rates of contraction in output and new orders slowed, with only a slight increase in employment.

BankservAfrica data also showed mixed economic activity in February.

“The value of standardised nominal value of transactions was R1.17 trillion in February compared to the R1.04 trillion in January, but the volume of transactions slowed to 133 million during the month compared to the 135.7 million tracked in January,” Naidoo says.

“The renewed moderation in economic transactions, after only two months of marginal improvement, confirms that the economic environment remains challenging and that the economy remains in a ‘muddle-along-little-thriving’ narrative.”

Kruger says while government recently announced what it will do about the energy and transport sectors, little reprieve can be expected in the short term.