South African economic transactions index slips to lowest level in months

After two consecutive months of growth, the BankservAfrica Economic Transactions Index (BETI) fell to its lowest level in months, indicating the country’s deteriorating economic activity.

The BETI is an early economic scorecard for South Africa, specifically regarding growth trends. 

It correlates highly with the South African Reserve Bank’s co-incident indicator and GDP figures while appearing a quarter earlier.

Feburary’s BETI, which now stands at 131, is at the same level as in October 2022 – a 1.3% decline from January and a 1.9% decrease from a year ago.

“This notable moderation in the BETI reflects the pressures that businesses in the country’s main economic sectors are experiencing from the prevailing dismal economic context,” said economist Elize Kruger.

“The renewed moderation in the BETI, after only two months of marginal improvement, confirms that the economic environment remains challenging and that the economy remains in a ‘muddle-along-little-thriving’ narrative.” 

Load-shedding, interest rates and inflation remaining at elevated levels, and the global economic slowdown have caused businesses in South Africa to experience significant cost increases, which are likely to be passed onto the end product price.

These price increases will, in turn, fuel consumer inflation, leading to lower margins.

This BETI decrease also comes in light of news last week that South Africa’s economy shrank far more than expected in Q4 2022.

The economy contracted by 1.3% in the fourth quarter.

The BETI is one of many local indicators to drop in the past few months.

The Absa Purchasing Manager’s Index fell sharply in February, indicating a significant deterioration in business conditions in the factory sector.

On the other hand, the S&P Global South Africa Purchasing Managers Index showed that economic activity in the private sector stabilised in February, after contracting for five months in a row.

This indicates a slight recovery in purchasing levels, though input cost inflation accelerated to a seven-month high. 

Globally, the manufacturing downturn showed signs of easing at the start of 2023, according to the latest J.P. Morgan Global Manufacturing PMI. 

Rates of contraction in output and new orders slowed, while employment posted a slight increase.

Economic activity during February was also mixed, according to the BankservAfrica data. 

“During the month, the value of the standardised nominal value of transactions was R1.17 trillion in February, a growth from the R1.04 trillion in January,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

“However, the volume of transactions slowed to 133.0 million during the month compared to the 135.7 million tracked in January.”