Author: Mike Schussler Source: BankServ Africa
Economy slows to a crawl – BankservAfrica index
Johannesburg, 14 May 2014 – Not even the pre-election spending of South Africa's political parties could put some momentum back into the economy, as the latest BankservAfrica Economic Transaction Index (BETI) shows that annual growth has slowed to only 0.2% in April.
Brad Gillis, CEO regulated products at BankservAfrica, says the BETI indicates that GDP growth is still lower than the population growth of 1.2%.
"The 0.2% year-on-year growth in April 2014 shows one of the smallest changes in economic activity over the last year. On top of that, five of the last eight months indicated a month-on-month decline and only three, including April, showed an increase."
Gillis says that the public holidays alone cannot be used as explanation – although the BETI does take their effect into account – as businesses no longer close shop on public holidays.
The economics of an election
Mike Schüssler, chief economist at economists.co.za, explains that political parties only spend on a massive scale once every five years. "Some of this spend may show in the April figures. May or June on the other hand may show more subdued economic activity due to the backlash of the strikes.
"In the past, the effect of a strike was most felt a month or two after the strike ended. On top of this, the economy is running the risk of negative growth as a result of high consumer debt levels and the inability of the economy to create new jobs."
What this means for business
Schüssler observes that businesses are struggling with the pace of economic change.
“The longer the strikes continue, the more the slowdown of economic activity becomes apparent." Vehicle sales dropped by 10.7% over a year ago while the PMI was well below 50 points, which is the neutral line in the measurement of the PMI indicating a decline.
On the international front, the South African economy will feel the effects of the recent lowering by the Organisation for Economic Co-operation and Development (OECD) of growth figures for the world at large, including China.
"It seems the whole economy is caught between strikes and slow international growth."
China, our biggest country trading partner, had its growth downgraded from 7.7% to 7.3% while the UK had its growth upgraded to over 3% from 2.7% by the OECD.
Contact Wendy Fourie for more information: firstname.lastname@example.org or (011) 497 4119.
Notes to the Editor:
The BETI stands for the BankservAfrica Economic Transaction Index. BankservAfrica is a payment enabling organisation operating between the various South African banks with a very secure messaging environment in place. economists.co.za is an economic consultancy that helped develop the BETI.
The BETI is a very fast and broad overview of current economic trends over a broad range of sectors, making use of economic transactions as captured by BankservAfrica. Like the Swift Index, the BETI is considered a “now-cast” number as a result of its speedy ability to convey the overall economic conditions to the market. Where most economic indicators can take anything between 38 and 76 days to become public knowledge, now-cast indicators take less than a month after the facts are revealed to become available to the market.
The BETI is also the broadest of the “now-cast” indicators to become available to the market, as it covers economic transactions across the whole economy. Very big distortive economic transactions do not form part of the BETI. This is also on its own a trend-strengthening indicative factor.