The South African Reserve Bank’s composite leading business cycle indicator rose 6.4% in February compared with the same month last year, with increases in seven of the 10 available component time series outweighing decreases in the other three.
The index was at 120.2 points in February, up 0.5% from its January level, the Bank said.
The largest positive contributions came from the number of residential building plans approved and the country’s US dollar-denominated export commodity price index.
A decrease in the volume of domestic orders received in the manufacturing sector and a deceleration in the six-month smoothed growth rate in job advertisements accounted for the negatives.
The leading indicator is one of three composite business cycle indicators analysed by the central bank to establish whether a reference turning point has occurred in the business cycle.
The leading business cycle indicator aims to predict economic activity several months ahead, while the coincident indicator reflects present activity and the lagging indicator confirms past changes.
The Bank report showed that the coincident business cycle indicator increased by 0.3% in January due to increases in the industrial production index and the real value of wholesale, retail and motor trade sales, while the lagging indicator was up 0.3% in the same month.
The central bank periodically reviews the performance of the composite business cycle indicators and their constituent time series to reflect structural changes in the economy, the discontinuation of existing economic indicators, the availability of new economic indicators or an improvement in the coverage of some indicators.
In its March quarterly bulletin, the Reserve Bank said the most recent peak in the country’s business cycle was confirmed as March 2022 with the trough having been April 2020, in the midst of the Covid-19 pandemic.
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