AFTER snapping a three-month winning streak in July, South Africa's seasonally adjusted leading economic indicator was back on the up in August and September, gaining 2.18% month-on-month (m/m) and 1.87% m/m respectively.
Apart from the aberration in July, the indicator has been rising every month since March.
The South African Reserve Bank's (SARB's) leading indicator for September was reported at 114.6 from 112.5 in August. Year-on-year, the figure for September reflects a 0.62% increase from a 2.67% decline in August.
This index provides a barometer of economic growth for at least six months ahead.
The leading indicator had been over 120 and nearer to 130 for the whole of 2007 when the country was enjoying its best run since the Second World War.
The coincident indicator for August was reported at 133.7 from 134.9. The lagging indicator was reported at 122.8 from 122.7.
The drastic declines in South Africa's leading and coincident economic indicators had cemented the idea that South Africa was in a recession. And this was borne out in no uncertain terms when news broke of a –6.4% GDP decline in the first quarter from –1.8% before. In line with the leading indicator, a still negative, but slightly better GDP figure was seen in the second quarter and this transpired via a reading of –3.0% on August 18.
The coincident indicator is an economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy. The lagging indicator changes after the economy has already begun to follow a particular trend.
The SARB uses over 200 economic time series to determine the turning points of the South African business cycle. Using these indicators, the leading, coincident and lagging composite business cycle indices are produced that
indicate the direction of the change in economic activity rather than the level of economic activity.
The markets are hoping for confirmation that SA's economy had shrugged out of the grips of recession in the third quarter.
GDP growth in South Africa is seen turning the corner at a rate of +0.7% quarter-on-quarter (q/q) seasonally adjusted annualised (saa) in the third quarter from the –3.0% and –6.4% in the second and first quarters, according to a poll of leading economists by I-Net Bridge.
The third quarter GDP last year was the 40th consecutive quarter of positive growth since 1998, but this came tumbling down in the fourth quarter as the first decline in a decade was registered.
The range of forecasts for the current survey was from –0.6% q/q to +2.0%, with a feature being that seven of the eight economists surveyed saw a move out of negative territory. Two of them, though, penned in growth of 0.0%.
Statistics South Africa (Stats SA) will release the latest gross domestic product (GDP) growth figures tomorrow.