February is up, but not a game-changer

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

Last month’s BankservAfrica Economic Transactions Index (BETI) shows that February was a good month for the economy, but is likely to be an exception in an expected overall downward trend.

“Although February 2016 saw the strongest month-on-month increase since December 2011 at 2.4% after inflation, it was still not enough to stop the yearly decline of the BETI. This increase suggests that February was an unusually strong month even when taking into account the extra day due to the leap year,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.

Analysts caution that although this sudden increase appears to be good news, it is likely to be a once-off event rather than a trend changer. Compared to a year ago, the number is still negative, but the short term indications are that at least February had an underlying trend of strong growth in both the overall number of transactions and the transaction values.

“The data, which is still coming in, shows that February 2016 was a very strong month and many economic indicators will support this as we get more data,” says Mike Schüssler, Chief Economist at Economists dotcoza. “However the initial feeling is that February saw unusual growth, rather than an indication of a shift to a faster growing economy, which is not expected. Over the long term the BETI shows that no trend is a straight line, and the unexpected increase in February is at least encouraging as it happened despite the lowest commodity prices in a decade in dollar terms. But even a small uptick does have a magnifying effect on the South African economy.”

The weaker Rand also allows for exporters to have a positive impact on the economy. While exports are not up in volume or dollar price, there does seem to be an indication that Rand prices are up, which brings in more money in local currency. This money is now in circulation, leading to more transactions, with the extra weekday in February also contributing to extra growth.

“Of course with Easter falling in March this year, that long weekend means the March BETI is unlikely to continue this strong growth trend,” cautions Schüssler.

Generally debit transactions are growing at a slower pace than electronic credit transfers and real time transfers, indicating that businesses and consumers are still wary of taking on new debt in the current business cycle.

“The number of transactions in February grew by 5.4%, the strongest year-on-year growth in since September 2014. However the seasonal data indicates that transactions were actually flat when taking into account the leap year, which provided for one additional day’s worth of economic transactions than the previous year,” explains Belrose.

The total increase in the standardised nominal value was ahead of inflation at 7.7%, which was the strongest since November 2015.