Technical recession likely avoided in 2nd quarter - economist | Fin24
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Technical recession likely avoided in 2nd quarter - economist

Jul 13 2016 21:00
Carin Smith

Cape Town - Although the South African economy is still in stagnation mode, it will probably not end up in a technical recession in the second quarter, Mike Schüssler, chief economist at Economists dotcoza, told Fin24 on Wednesday.

He was commenting on the June 2016 BankservAfrica Economic Transaction Index (Beti) report. The Beti measures all SA interbank transactions under R5m. The latest data shows there are no indications that growth levels will pick up in the immediate future as economic transactions oscillate between negative and positive on a monthly basis.
"Retail sales for May astounded and manufacturing is showing signs of picking up after five years of rand weakness. The patient is out of the intensive care unit, but still in hospital," explained Schüssler.

The June 2016 Beti recorded a slight month-on-month increase of 0.3% after experiencing a significant drop in May 2016. This is the lowest increase this year and adds to the downward year-on-year trend. Along with below inflation credit growth, economic transactions also indicate that bank customers are transacting more, but at a very slow rate.

The quarterly percentage changes remain negative, while the yearly increase is below 1% - signs of a challenged SA economy, according to the Beti report.

READ: Glimmer of hope for SA economic growth

In Schüssler's view, the SA economy is unlikely to grow much and the average person in the country is actually still getting poorer.

"The economy is not shrinking anymore, but we are not growing it fast enough for the average person to feel the benefit. Yes, there are some parts of the economy which are looking better, but others are not. There is just no spark lighting a fire under the SA economy and no evidence to suggest we are close to an upswing," explained Schüssler.

"It is difficult to gage the direction of this economy other than to say it is still a weak economy. The political situation also seems to cause people not to be willing to put big money down at the moment," said Schüssler.
"While the data shows no major signs of growth, there are indications that the major month-on-month declines are losing impetus with positive increases in every second month’s reading. Long struggling sectors, such as manufacturing, are showing signs of a slight pick-up, while the declining car sales record indicates a distressed market."

The Beti report emphasised that it is important to note that May 2016’s numbers were modified as both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in below initial expectations. At 6.5%, the PPI figures were below the 7.1% expectation. Inflation, which carried a reading of 6.1%, was also below the market consensus of 6.3%, and the Beti internal projection of 6.5%.
The May monthly decline was initially estimated at -3.1% and came in at -2.1% after the inflation estimates were replaced with the actual numbers. 

ALSO READ: Modest growth still supporting SA economy - index

bankservafrica  |  mike schussler  |  sa economy


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