SA interbank transactions drop most in 8 years - index

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Cape Town - Interbank transactions under R5m in May recorded its largest drop in a single month since August 2008, the 2016 BankservAfrica Economic Transaction Index (Beti) revealed on Wednesday.

The Beti is a measure of all South African interbank transactions under R5m, giving a broad picture of the current SA economy. The drop in May is flouting the positive growth trend shown in the three previous months.

"The Beti index is showing a very big decline in May - after three good months. Remember, we do not pick up much of the mining activity as we only use transactions under R5m for the Beti," Mike Schüssler, chief economist at Economists dotcoza, told Fin24.

"For the second quarter, we already have data from the Beti that shows there is a good chance the recession will carry on - although it is not 100% sure yet."

The Beti release came on the same day as ratings agency Fitch's surprise announcement that it decided to keep South Africa's investment grade credit outlook stable and Stats SA stating that SA has recorded a negative growth rate of -1.2% in the first quarter of 2016. Fitch warned that political and growth concerns in SA should be addressed.

READ: SA's economy shrinks by 1.2% in first quarter of 2016

“The Beti recorded a 0.4% increase in comparison to a year ago, indicating that the economy is unlikely to record strong growth. The quarterly results recorded a 1.3% decline off a strong February performance followed by two comparatively stable months,” explained Dr Caroline Belrose, head of fraud and data analytics at BankservAfrica.

The actual number of transactions increased by 6.3% compared with May 2015, totalling R85.2m. However, transactions were down on the April figure by R2.5m.

The Beti report reflects a trend which points to a slowdown, last seen in big declines of a similar nature recorded during the global economic crisis and subsequent recession of 2008/2009. The SA Reserve Bank (Sarb) indicates that the current slump started in December 2013, and all indications are that the downturn is ongoing, according to the Beti report.

“This protracted downswing has lasted about 30 months, making it the second longest dip since 1994,” said Schüssler.

“As the Beti has consistently shown recently, the economy seems flatter and more uncertain. “The yearly data remains positive, if flat, while the monthly data sets are extremely volatile,” added Belrose.

READ: SA makes final junk hurdle, but GDP dives 1.2%

Other data, such as cars sales and the Manufacturing PMI of Barclays, were also weaker in May than in April 2016.

Large parts of the economy are captured by the transactions under R5m, but what is evident is that larger transactions such as mining sales will also play a role when GDP data are measured in the second quarter, Schüssler pointed out.

Looking back, the April number was stronger than the trend while May was weaker, leaving the growth of the quarter in doubt.

“While the June level will be critical to the outcome of the quarter, the real concern is that if the May trend is confirmed, a decline in GDP could be expected,” explained Schüssler.

"However, we must not panic, but rather understand that we need to work hard at creating economic growth. It cannot be expected to happen overnight."

ALSO READ: GDP dive and junk reprieve sends rand into tailspin


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