BETI indicates SA economy still in decline

Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.

Danger that a third quarter dip could spell technical recession.

The most recent BankservAfrica Economic Transaction Index (BETI) indicates that economic activity over the short term is in retreat, despite still being positive when compared to a year ago.

This latest quarter was the weakest quarter-on-quarter change since November 2013 and shows how deep the decline in the South African economy is, according to economic transactions as measured by BankservAfrica.

There was a 3% year-on-year decline in the number of transactions reflected by the BETI, making this the second consecutive month of decline in the number of transactions.

“The BETI indicates that monthly changes are declining at the fastest rate. Three consecutive monthly declines are unusual when an economy is not in decline – this has happened only once in the last four years,” Mike Schüssler, Chief Economist at Economists dotcoza.

“Should there be a third quarter measuring a decline, this would put the South African economy into a technical recession. It is highly likely that most people have begun experiencing the effects of the current continuous decline in the economy already.”

The South Africa economy is being hit hard by lower commodity prices, low consumer confidence as measured by FNB, and business confidence as measured by RMB. The Standard Bank PMI is also negative, as is the SARB lead indicator.

“The BETI is a good co-incident indicator which confirms the overall decline in the domestic economy. When five of the last nine months have indicated monthly declines with four quarter-on-quarter declines as well, the BETI is certainly not indicating a strong economy. This is in spite of the fact that, due to strike action in 2014, we are comparing current figures to a low base, making the annual changes seem artificially high,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.

The evidence suggests that there is unlikely to be a quick turnaround of the situation.

Forecasts from official sources such as the IMF and the South African Reserve Bank indicate much slower growth for 2015 and 2016. These predictions are backed up by the BETI, which predicts that the growth forecast may decline further.