Fragile July transactional figures paint a grim preview of Q3

July was a very weak month for South Africa as economic transactions fell on every measure and usual periods for the BankservAfrica Economic Transaction Index (BETI). Due to this, the total real value of the index fell by -0.2% in July 2016 on a year-on-year basis.

The BETI is a measure of all South African interbank transactions under R5 million.

Quarterly and monthly levels also declined by -3% and -1.2% respectively. July seems to have been a particularly weak month, showing fragility similar to that experienced in January and May this year.

The quarterly decline was the biggest decline in 18 months indicating that economic activity is slowing dramatically again.

Although the BETI does not pick up transactions over a R5 million individual transaction limit it is clear that far more sectors are struggling than in the 1st quarter where GDP data showed that the large drop in mining was the biggest cause of the economic decline.

At present the BETI indicates a broader economic slowdown in the 3rd quarter after a more positive 2nd quarter. No matter what the outcome of other data the BETI indicates that the economy is still weak and volatile.

Electronic credit transfers via electronic funds transfer (EFT) did not even show any nominal growth at all while normal debit transfers were down, indicating a long-term decline in credit growth. Higher interest rates and slow economic growth is taking a toll on debit growth and this will, in all likelihood, continue in the short-term.

Only real time via electronic clearing showed a meaningful increase. However, this could be the result of the shift away from cheque-based transactions.

While the second quarter gross domestic product (GDP) growth is likely to be far more positive than the negative 1st quarter figures, the data suggests that the economy is off to a bad start with low levels of transactions likely to continue into the third quarter.

The BETI and the co-incident indicator from the South African Reserve Bank seem to have a relatively close relationship as depicted in the three month moving average quarterly growth rates shown below.

Graph 1: The SARB co-incident indicator and the BETI

Source: BankservAfrica and Economists dotcoza

July’s transactional numbers decline

In line with July’s data, the volume of transactions going through the BankservAfrica payment system declined by -1.2%. The total nominal value before standardisation also showed a decline.

The standardised value of the BETI was R749 billion.

July was certainly a very weak month; and indicates that while the South African economy may have shown a glimmer of hope, there is still cause for concern.

Table 1: The BETI index

Source: BankservAfrica and Economists dotcoza

Table 2: The average value of transactions and number of transactions

Source: BankservAfrica and Economists dotcoza