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Improved money flows a good reflection of economy prospects

Mar 16 2017 17:55
Lameez Omarjee

Johannesburg – Money flow through the South African financial system improved by 1.9% for February 2017, according to the BankservAfrica Economic Transaction Index (BETI).

This shows that 2017 is off to a better start than 2016, said the report. Improvements have been reported for two consecutive months. The BETI improved 0.1% in January 2017. This compares favourably to the decline of -0.6% in December 2016 and -0.4% in November 2016.

READ: Uptick in money flow augurs well for SA's economy

“These correspond with the quarterly BETI changes, which for the first time in 10 months, points to a strong change in trend for the South African economy,” said the report.

The quarter leading up to February 2017 showed an increase in flows by 1.4%. This is better than the quarter leading up to January 2017 where flows declined 0.8%.

However, on an annual basis, February 2017’s flows decreased 1.2%, compared to the decrease recorded in February 2016 of 0.2%.

“Although it is likely that the annual changes will remain negative for a few more months, the positive short-term trend should see the annual figures move into positive territory from around May 2017 onwards,” the report said.

This will be brought on by improved economic conditions, as better rainfall conditions are expected, alongside improved commodity prices. An improvement in the manufacturing sector is also supposed to contribute to a better economic environment.

“While the production side of the economy is picking up, it is very likely that consumers will remain under pressure,” said the report.

Statistics South Africa (StatsSA) recently released manufacturing production data, which was up 0.8% in January 2017. This was still below market expectations.  

READ: Manufacturing sector continues to underperform

Manufacturing production declined 0.4% for the three months leading up to January 2017, Fin24 reported. Stanlib chief economist Kevin Lings said the declining growth in the sector shows it continues to drag down the overall performance of the economy.

ALSO READ: SA must boost business confidence to grow – economist

Business confidence levels still remain below neutral levels of 50. Rand Merchant Bank (RMB) and Bureau for Economic Research (BER) business confidence index released on Wednesday show an uptick of 2 points to 40 for the first quarter of 2017.

Lings added that an improvement in business confidence would help grow the economy by encouraging fixed investment.

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