Economy slows to a crawl – BankservAfrica index
14 May 2014 | Surveys, Reports and Ratings | General | Brad Gillis, BanservAfrica
Not even the pre-election spending of South Africa's political parties could put some momentum back into the economy, as the latest BankservAfrica Economic Transaction Index (BETI) shows that annual growth has slowed to only 0.2% in April.
Brad Gillis, CEO regulated products at BankservAfrica, says the BETI indicates that GDP growth is still lower than the population growth of 1.2.
"The 0.2% year-on-year growth in April 2014 shows one of the smallest changes in economic activity over the last year. On top of that, five of the last eight months indicated a month-on-month decline and only three, including April, showed an increase."
Gillis says that the public holidays alone cannot be used as explanation – although the BETI does take their effect into account – as businesses no longer close shop on public holidays.
The economics of an election
Mike Schüssler, chief economist at economists.co.za, explains that political parties only spend on a massive scale once every five years. "Some of this spend may show in the April figures. May or June on the other hand may show more subdued economic activity due to the backlash of the strikes.
"In the past, the effect of a strike was most felt a month or two after the strike ended. On top of this, the economy is running the risk of negative growth as a result of high consumer debt levels and the inability of the economy to create new jobs."
What this means for business
Schüssler observes that businesses are struggling with the pace of economic change.
"The longer the strikes continue, the more the slowdown of economic activity becomes apparent." Vehicle sales dropped by 10.7% over a year ago while the PMI was well below 50 points, which is the neutral line in the measurement of the PMI indicating a decline.
On the international front, the South African economy will feel the effects of the recent lowering by the Organisation for Economic Co-operation and Development (OECD) of growth figures for the world at large, including China.
"It seems the whole economy is caught between strikes and slow international growth."
China, our biggest country trading partner, had its growth downgraded from 7.7% to 7.3% while the UK had its growth upgraded to over 3% from 2.7% by the OECD.
