Economic activity lifted only modestly in August, but a survey shows that increasing confidence levels along with expected changes in interest rates and improving consumer inflation levels could boost economic activity during the last months of 2024.
The BankservAfrica Economic Transactions Index (BETI) for August shifted just 0.1% to reach an index level of 137 in August compared with 136.9 in July, remaining at its highest level since May 2022.
The BETI measures the value of all electronic transactions cleared through BankservAfrica (Africa’s largest automated clearing house) at seasonally adjusted real prices.
The index is an early indicator of economic growth and activity, predicting quarterly GDP three months in advance.
After a spike in July a slight moderation was evident in the number of transactions cleared through BankservAfrica.
The number of transactions cleared during August was 162.6 million compared with 162.9-million in July (this was up from 147.4-million in June). The standardised nominal value of transactions increased to R1,308-trillion in August 2024, higher than the R1,283-trillion in July.
“The BETI is essentially treading water but consolidating what seems to be a stronger performance in quarter three,” independent economist Elize Kruger said.
Stats SA reported earlier in September that SA saw 0.4% GDP growth in the second quarter. Still, economists said the continued absence of load-shedding and more positive sentiment after the formation of the government of national unity (GNU) were likely to contribute to stronger growth in the second half of the year, resulting in 1% average growth in 2024.
“Recent economic data outcomes have been somewhat mixed and quite volatile, but the underlying positive sentiment evident in the economy is starting to feature in confidence-related survey results.”
In the first business sentiment survey released after the formation of the GNU, the RMB/BER Business Confidence Index rose by three index points to reach 38 in the third quarter of 2024.
“Though respondents noted constraints, they were generally upbeat about future business conditions. For the first time since early 2022, a slight net majority of respondents across the different sectors expect business conditions to improve in the next quarter,” Kruger said.
For the first time since early 2022, a slight net majority of respondents across the different sectors expect business conditions to improve in the next quarter.
“While still early days, improved confidence levels could translate into higher investment spending in the economy, driving a much-needed better overall economic performance.”
With significant cuts to fuel prices over the past six months, and more expected in October, these lower costs will filter into business and household budgets and reflect as an immediate saving while also contributing to a notable decline in consumer inflation.
In July, SA’s consumer inflation dipped below 5% for the first time in a year, easing to 4.6% from 5.1% in June. The SA Reserve Bank (SARB) expects inflation to return to the midpoint of its 3%-6% target band in the fourth quarter of 2024, and to average 4.9% for the year.
According to Kruger the improved inflation outlook, amid mediocre economic growth, would provide ample justification for the SARB to lower interest rates by at least 25 basis points to 8% at next week’s monetary policy committee meeting, with further cuts anticipated in subsequent meetings.
“These developments are likely to boost household and business confidence levels further, supporting economic growth in the second half of 2024 and into 2025,” Kruger said.
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