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Johannesburg - According to the latest BankservAfrica Economic Transaction Index (Beti), an extremely fragile economy is trying hard to shake off its self-inflicted blues so it can recover enough to give South Africans a very merry Christmas.
The Beti indicates that the South African economy is in recovery mode, showing a small, but significant, growth of 0.8% year-on-year.
With petrol prices decreasing again in December and other energy costs, including the likes of gas and diesel, also declining, an additional economic boost is expected.
“The economic recovery is ongoing, but only time will tell to what extent Christmas spending can give the economy a boost,” says Dr Caroline Belrose, head of draud and data analytics at BankservAfrica.
“The growth figure is not a high number, but it is the best year-on-year percentage change since February this year. Therefore, although an improvement of less than 1% in real terms is certainly not ideal, November at least confirms an 'uptick' trend.”
The standardised Beti reflects a value of R686bn in transactions for the month of November, which is up by 5.2% on a year ago. This is R1bn more than the previous record of December 2013, and probably indicates that the value of transactions in December 2014 – the festive month – is again going to break all records.
Signs of hope
The quarterly improvement of 1.1% is the best since June, which indicates that an improvement in quarter-on-quarter gross domestic product (GDP) is very likely. The month-on-month growth was 0.5%.
According to Mike Schüssler, chief economist at economists.co.za, the underlying trend of the Beti is still one of steady recovery rather than fast expansion.
“There is no doubt that South Africa will see higher growth in the fourth quarter, although it will still be somewhat subdued – perhaps 2.5% or less.
He says the Beti reflects an economy that is still getting up on its feet rather than walking forward.
The PMI declined slightly, but remained positive in November and comparative sales showed a small decline. Although the Beti shows small positive movements in all time periods for November, the operative word is still "small improvements".
Decline in number of transactions
The actual number of transactions within the Beti does reflect an underlying problem, showing a decline of 2.3% over the year, while the nominal value increased by only 2.1% before standardisation.
“The pounding which the economy experienced in the form of strikes, power outages and other infrastructure constraints was very severe and the effects may last a little longer. While confidence is returning, the level of transactions on a year-ago are certainly below both expectation and potential," said Schüssler.
The decline perhaps indicates that, while the economy is expanding, there are fewer people transacting. An alternative explanation is that people may be little more cautious when they do actually transact.
It is the third time in the last 18 months where this has happened.
Although this trend was followed by a bounce-back when it happened before, this drop in the number of transactions should be watched carefully.
Overall, the indications are that South Africa is growing, but that growth remains subdued. The 2014 economy and its transactions can thus be summarised as fragile.
