Economy lost momentum again in third quarter – BETI

The South African economy lost momentum again in the third quarter due to persistent constraints according to the BankservAfrica Economic Transactions Index data.

These constraints include ongoing load shedding, water supply issues, a logistics sector burdened by a steep deterioration in rail services and ongoing port inefficiencies.

“The BankservAfrica Economic Transactions Index (BETI) slipped marginally to an index level of 133.6 in September compared to the revised 133.9 in August, while the BETI increased by 2% on an annual basis,” Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says.

The BETI declined 2% on a quarterly basis, confirming the economy lost momentum. This is substantiated by the data showing the BETI declined for the past three consecutive months.

“As a valuable early indicator of economic activity, the BETI data reflects the ongoing ‘muddle-along’ narrative playing out in the South African economy,” Elize Kruger, an independent economist, says.

She sees signals of renewed strain on inflation in the near term with the Rand exchange rate remaining under pressure. This will have negative consequences for the prices of imported goods, while the fuel price will add to the financial misery.

“As a consequence, interest rates are forecast to remain at current elevated levels for some months to come, with no near-term reprieve expected,” Kruger says.

Households are already displaying signs of stress, with South African Reserve Bank data indicating that household credit continues to mirror the effects of weakened finances, increased interest rates, fragile consumer confidence, and lender caution.

Household credit growth eased to 5.8% in August, the lowest since January 2022, as all the components, except credit card usage, slowed down.

ASLO READ: Fewer economic transactions in August, but more than a year ago

Indicators and BETI confirmed loss of momentum

Nowcast indicators confirmed the loss of momentum in September. Nowcasting in economics is the prediction of the very recent past, present and very near future state of an economic indicator, such as inflation.

The S&P Global South Africa Purchasing Managers’ Index (PMI) also slipped in September to an index level of 49.9, while the Absa Purchasing Managers’ Index also subsided considerably to an index level of 45.4, down from 49.7 in August, confirming ongoing strain in the manufacturing sector.

In the first half of 2023 domestic new vehicle sales were resilient, but retreated in September as declining business confidence and reduced disposable income took a toll on buyers, Kruger says.

The standardised nominal value of transactions cleared through BankservAfrica in September was R1.248 trillion, compared to R1.207 trillion in August, while the number of transactions subsided somewhat to 152.2 million compared to 152.6 million in the previous month, Naidoo says.

There was an 8.8% drop in the average value of transactions cleared through BankservAfrica in September to R7 811, compared to R8 565 in September 2022, also indicative of the change to digital, instant payments in the economy.

Kruger says the BETI signals a muted economic growth performance in the third quarter, weaker than the second quarter and with a probability of a negative quarterly growth rate.

“A growing number of indicators confirm that the economy remains lacklustre and unable to gain much-needed momentum. It is increasingly clear that the cumulative impact of many challenges that have been playing out in the South African economy over the past 18 months is now at its harshest, at a time when confidence levels are still under severe pressure and with no clear end in sight for the ongoing challenges,” she says.