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12 September 2018

BankservAfrica’s monthly index reflects SA’s technical economic recession

BankservAfrica’s economic transactional data shows some growth in August but SA economy is not out of the woods

The South African economy’s decline into a technical recession, as confirmed by Statistics South Africa’s Q2 2018 GDP figures last week, has been evident in BankservAfrica’s economic transactional index for July with the latest data now pointing to some improvements in August owing to backdated salary payments, amongst others.

“The monthly BETI is a now indicator that tracks South Africa’s economic performance in near, real-time terms, using BankservAfrica economical transactional data against South Africa’s main economic growth drivers,” explains Shergeran Naidoo, Head of Stakeholder Engagement: BankservAfrica. “As such, by way of the BETI we were able to track the declines on both data sets that revealed the below par performance of the economy. There were, however, some changes on the BankservAfrica index such as the salary changes which led to an increase in consumer spending, and is reflected as growth in the BETI.”

According to Naidoo, the standardised BETI was R849.1 billion in August 2018 and the number of transactions reached a new record of 104.7 million. The increase in transactions are the result of the continuous switch to electronic payments away from cash and card and the additional money that South African civil servants had to spend due to the delayed salary adjustment payments in July and August.

On a year-on-year basis, the BETI declined faster in August at -0.8% than in July 2018 at -0.6%.

“On this basis, it is evident the economy is still in decline. However, the quarterly and monthly measurements suggest the economy is looking stronger than previous months,” explains Mike Schüssler, Chief Economist at Economists dotcoza.

According to Naidoo, the BETI’s rate of change turned into an increase of 0.5% for the quarter that ended in August compared to the corresponding quarter that ended in May. This compares to the -1.2% change for the quarter that ended in July 2018 against the quarter that ended in April 2018.

“This reflects the strong change in direction. However, one must be careful to believe this is a change in trend as these indications are only for the first and second months of Q3,” explains Schüssler.  “However, if we are to go by August 2018’s data, this gives hope that the technical recession may not continue into the third quarter. This, however, cannot be confirmed as yet.”

On a monthly basis, the rate of change between August and July was 0.9% which is also a strong and positive improvement.

“One must remember that that this change may be due to the backdating of salary increases for civil servants in July and August as well as the late salary adjustments of Eskom employees and some municipal workers. We may still see delayed backdated payments occur in September, which will add to economic transactions improvements,” says Schüssler.

However, he cautions that one or even two months of data are hardly ever an indication of a change in trend.  “SA’s economy is not out of the woods yet and even if there is growth in Q3 2018, this is unlikely to be very strong. The delayed salary increases have certainly played a positive role but once these are out of the system, the underlying downward trend may continue. Moreover, there is no confirmation as previous numbers were adjusted downwards as inflation was slightly higher than expected,” ends Schüssler.

Please refer to the BETI report for additional details.

 “The monthly BETI is a now indicator that tracks South Africa’s economic performance in near, real-time terms, using BankservAfrica economical transactional data against South Africa’s main economic growth drivers,” explains Shergeran Naidoo, Head of Stakeholder Engagement.

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.