January transactions show SA economy flat but slowly positive

The latest BankservAfrica Economic Transaction Index (BETI) has revealed that January had 80.7 million transactions via the BankservAfrica payments system, up 1.1% on 2014. The standardised monetary value fell below R600 billion for the first time since January last year and sits at R593.5 billion.

With consumer price inflation slowing in January 2015 as a result of huge fuel price decreases, the lower rate of inflation has helped keep the year-on-year BETI positive despite a very flat monthly change.

“South Africa’s payment system sits centrally in the economy reflecting a flat start to the year, but at least not a decline in the country’s economic activity,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica. “According to the BETI, December 2014 remains the strongest month in nearly two years, so it is relative for January 2015 to show a 0.1% month on month decline in economic activity compared to December. However, against January 2014 there is positive year-on-year growth of 1.1%, and quarterly growth is 1.2%.”

January is traditionally the month with the smallest number of transactions in the payment system each year. In nominal terms, the standardised data underlying the BETI for January 2015 is 6.3% higher than January 2014.

January’s small month on month decline can likely be attributed to slowing consumer price inflation, and may also be a result of power outages and perhaps also the drought that is hitting parts of the KwaZulu-Natal economy countering the effect of the big drop in fuel prices. Towards the end of the month there may have been a holding back of fuel purchases as motorists and businesses waited to buy cheaper fuel in February. It is possible that this may have delayed some economic activity which we may now see in February.

According to Mike Schüssler, Chief Economist at Economists dotcoza, below potential growth is still the best description for the overall economic trend with some upward potential seen in the next month.

“The trend in the economy remains slow but positive growth overall with some upward potential seen in the next month. Another big fall in fuel prices could help the South African economy with its high logistics cost. Against this is the massive shortage of electricity which will at least counter some of the positive effects of oil price declines. But overall the electricity outages have not caused the economy to go into a declining trend which at least shows a resilience from economic role players,” he says.

The Purchase Managers Index (PMI) was very strong in January, but new car sales declined, so the BETI seems to show a middle ground with overall slow but positive year on year growth.

As with any other broad data, the January BETI data on its own is not the only factor to consider. The fact that December was the strongest month in two years does at least indicate an overall better economy when both months are looked at together. Slow but positive is still the best description for the overall economic trend.