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13 June 2018


Economic transactions show rapid declines in May


Latest BankservAfrica Index tracks Q1 2018 GDP figures of a weakened economy

 

The BankservAfrica Economic Transaction Index (BETI) for May reflected the most significantly noticeable monthly decline, since December 2016.

According to Shergeran Naidoo, Head of Stakeholder Engagement: BankservAfrica, the BETI declined by 2% between May and April.

“This is the largest decline since September 2013, and is a clear showing of the weakened South African economy,” he says.

Mike Schüssler, Chief Economist at Economists dotcoza believes that this could be a result of the declines of the BETI and the GDP speeding up. However, he cautions that it is too soon to assume this month’s decline is a long-term trend.

The standardised BETI, which accounts for the number of days in a month, as well as weekdays, was R817.5 billion in May.

For the second time in the history of the BETI, the number of transactions were above the 100 million level, says Naidoo. While this would have been a good sign for the economy, the downside is that the average value of transactions declined by 4.1%.

This is the 13th consecutive month in which such declines occurred. This is only exceeded by the period following the 2008/9 global financial crisis. “However, the declines are nowhere near the large double-digit declines of that period,” says Schüssler.

Therefore, while the total nominal transactional value increased by 3.9%, the actual transaction value was less – even in nominal terms.

 “VAT increases, higher fuel prices and sugar tax have all had an impact on consumers,” says Schüssler. This was worsened by the bus strike which impacted on people’s ability to earn a living. Furthermore, the ongoing government wage negotiations, as well as those at Eskom, are affecting the formal sector’s wages, and dragging down consumer spending ability. 

“The average South African consumer is once again under pressure and the high levels of confidence experienced in the first quarter of the year is likely to be lower on the back of the latest cost burdens,” says Schüssler. He adds that the recent GDP figure announcement, along with the large BETI decline, is of concern and should be closely watched by policymakers.

Please refer to the BETI report for additional details.




According to Shergeran Naidoo, Head of Stakeholder Engagement: BankservAfrica, the BETI declined by 2% between May and April.  “This is the largest decline since September 2013, and is a clear showing of the weakened South African economy,” he says.

Graph 1: The BETI and the SARB coincident Indicator

Source: BankservAfrica and Economists dotcoza

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Mike Schüssler has his sayMarket insights from
Mike Schüssler
Well-known economist Mike Schüssler has partnered with BankservAfrica and analyses our payment information.  Read his report for further commentary:
 

The BETI has a very good correlation with the SARB’s co-incident indicator and has an R squared of 0.95256 with no lag, coming out up to four months ahead of the co-incident indicator. (An R squared of 1 would be perfect.) The level of significance using the F distribution is higher than 97% confidence level.

The Durbin-Watson is 0.5333 which indicates that the BETI is a very good indicator of the current level of economic activity. Data dating back to the beginning of 2002 has been tested and it is believed that the BETI is a robust indicator of current economic activity.

The BETI was also tested against both overall GDP and GDP excluding agriculture. Excluding agriculture, it has an R squared of 0.97078 with GDP lagged by one quarter.

The significance of this data would be in excess of 95% and the Durbin-Watson is 0.63. (F statistic here is over 543 which, on some tables, indicate about 96% significance.)

With general GDP the BETI has a 0.9703 R squared and an even better F statistic, and a Durbin-Watson of 0.66. Again the BETI is ahead of GDP with one quarter.

The BETI is designed as an early economic scorecard which will give an overall trend in economic activity in the near term. It indicates that the economy is growing, but probably only around 3% on a year ago basis and gives us an economic scoreboard well before other data can. It is reliable and will in the future be a very important statistic on the economic release calendar.

The BETI is released on a regular basis, about ten days after month end and gives South Africans an insight into GDP growth levels.