Signs of hope for ailing economy as bank transactions hit new record

The South African economy may still be in decline, but the latest BankservAfrica economic transaction index (BETI) shows some growth in August.

The economy has been battered by a slew of recent negative economic news, from slipping into a recession, to decreased mining production and lagging business confidence

The BETI data suggests the economy is looking stronger than previous months, but it is not out of the woods yet, according to Mike Schüssler, chief economist at Economists dotcoza.

The standardised BETI was R849.1bn in August 2018 and the number of transactions reached a new record of 104.7 million. Schüssler said the increase in transactions could be the result of the continuous switch to electronic payments away from cash and cards and the additional money that South African civil servants had to spend due to the delayed salary adjustment payments in July and August.

On a year-on-year basis, the BETI declined faster in August at -0.8% than in July 2018 at -0.6%. However, the BETI’s rate of change turned into an increase of 0.5% for the quarter that ended in August compared to the corresponding quarter that ended in May. This compares to the -1.2% change for the quarter that ended in July 2018 against the quarter that ended in April 2018.

For Schüssler this reflects a strong change in direction. “If we are to go by August 2018’s data, this gives hope that the technical recession may not continue into the third quarter. This, however, cannot be confirmed as yet,” he said.

On a monthly basis, the rate of change between August and July was 0.9%, which is also a strong and positive improvement.

“One must remember that this change may be due to the backdating of salary increases for civil servants in July and August as well as the late salary adjustments of Eskom employees and some municipal workers. We may still see delayed backdated payments occur in September, which will add to economic transaction improvements,” said Schüssler.

However, he cautioned that one or even two months of data are hardly ever an indication of a change in trend.  

“SA’s economy is not out of the woods yet and even if there is growth in the third quarter of 2018, this is unlikely to be very strong. The delayed salary increases have certainly played a positive role, but once these are out of the system, the underlying downward trend may continue," warned Schüssler.

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