by Theo Boshoff

A game changer

The strikes' impact may change the ways of business

The BankServAfrica Economic Transaction Index reflects current economic conditions
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Not only is the budget deficit now likely to be higher, but business confidence is likely to wane as the medium-term effect of strikes makes life difficult and adds uncertainty for consumers as well as for the business sector.

Local confidence in the economy is also low. 

According to Brad Gillis, CEO of PSO ( a payment clearing house system operator) business at BankservAfrica, business owners should take note of the latest BankservAfrica Economic Transaction Index (BETI) figures.

“The BETI has shown reliability over time by confirming a lower forecasted economic growth trend in line with a variety of other indicators,” he explains.

Chief economist at economists.co.za Mike Schüssler concurs and warns businesses, especially smaller enterprises, to sharpen their pencils.

“Things will not work the way they used to. They should revisit what they do, and look for new opportunities. I think that Marikana changed the labour relationship landscape in that an unprotected strike managed to secure increases well above inflation. Employees are likely to now expect higher wage increases than before,” Schüssler said.

The BETI’s performance has been similar to that of the South African Reserve Bank’s leading indicator, which has shown a declining rate on a year-on-year basis for seven months now.

This indicates that actual economic activity will soon be growing at a slower pace, as the leading indicator shows economic activity six months to a year ago.

According to Gillis the BETI also has a close and meaningful relationship with GDP growth and is one of the faster modern economic indicators available, with a much shorter lead time than other broad indicators.

Schüssler explains the stagnation, as identified by the BETI, is also broadly in line with slower growth in new vehicle sales, declining passenger arrivals for both domestic and international flights at South African airports, as well as still declining year-on-year electricity sales.

Other evidence, such as port volumes and the Purchasing Manager Index (PMI), is in decline, indicating that the BETI is in line with a host of sector-specific indicators as well.

Whilst the BETI is but one indicator, it is broad-based in that it closely tracks the domestic economy, as well as some smaller import and export transactions.

However, against this trend the SARB Coincident Indicator shows quicker growth, but the latest data is only available for May, whilst the BETI data is for the current month.

Despite the coincident index, which lags about two months behind the BETI, showing stronger growth in both April and May, the fact remains that its divergence is probably a short-lived growth spurt rather than a reflection of the present.

It also seems to reflect past conditions, whilst the BETI shines the spotlight on present conditions as they are felt by most economic role players.

“Economic transactions reflect the underlying economic activity,” says Schüssler.

“The BETI reflects this activity quite fairly. The overall trend in the economy is, therefore, well represented by this very quick and broad indicator of the economy. No one likes to be the first bearer of bad news, but this is often needed, as businesses need to get a sense of what the reality is on the ground. Likewise, policy makers need quick, broad-based information on which to act. At present the BETI is the second broad-based indicator to show sustained slowing of the economy, together with the SARB Leading Indicator,” he said

Contact Gerian Miller for more information: GerianM@bankservafrica.com or (011) 497 4067

 

 

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