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Downgrades, politics could trip up recent economic gains

Apr 14 2017 10:56
Carin Smith

Cape Town - The recent uptick in the South African domestic economic activity is reflected in the latest BankservAfrica Economic Transaction Index (BETI).

March was the third consecutive month of real gains after taking inflation into account.

Mike Schüssler, chief economist at Economists dotcoza, pointed out, however, that it’s still unclear how recent political and economic developments in SA may change this. 

"Something was happening in the SA economy in the first quarter of 2017. Ultimately, looking at the economy, it was looking better than in the 4th quarter of last year and brought a lot of hope for a better growth rate in 2017," Schüssler told Fin24.

"I still believe we would have had a good chance, but obviously the downgrades will make an impact - although maybe not in April already. It looks like a lot of the economy is still struggling, but some parts of the economy were looking up a lot more before the downgrades."  

The monthly BETI improved by 0.7% in March, indicating the economy is in recovery mode. Although this was a slower increase than that between February and January, the real increases for three consecutive months so far in 2017 are a positive sign for the South African economy, according to the BETI report.
 
On a quarterly basis, the BETI improved by 2.7%. This is the strongest quarterly growth since April 2016 and adds to the growing sentiment that the SA economy is building up steam.

Additionally, the speed of this recovery from the very weak fourth quarter suggests the first quarter of 2017 experienced good gross domestic product (GDP) growth, states the report.

READ: Downgrade: Where to now?

On a year-on-year basis, the March BETI was still negative at 1.4% lower. However, since reaching its lowest level for more than two years in December 2016, the index has recovered back to levels of seven months ago.
 
The growth in car sales and the Purchasing Managers Index (PMI) at above 50 basis points in March are positive for the economy, according to the report. Added to these, is the recent SA Revenue Service (SARS) announcement that tax collections rebounded in March off a lower base in February.
 
"The green shoots are just starting to grow, however it’s unclear how recent political and economic developments in SA may change this," said Schüssler.

The total number of transactions was 7.5% higher than March 2016 although the value of transactions was up by only 2.4% in nominal terms. The standardised BETI for the month was R799.4bn and there were 94.5 million transactions in total.

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