The South African Reserve Bank’s (Sarb) composite leading business cycle indicator rose 4.1% year on year but fell 1.8% month on month in April, due to a deceleration in the six-month smoothed growth rate in money supply and a decrease in the number of residential building plans approved.
Eight of the 10 available component time series were down, outweighing increases in the volume of domestic orders received in the manufacturing sector and the composite leading business cycle indicator for South Africa’s major trading-partner countries, the Bank said.
“The readings were impacted by the Middle East war from the end of February, impacting sentiment in March severely, and running into April. Most indicators fell … evidencing the drop in demand, negatively impacting economic activity,” Investec economist Annabel Bishop said.
“Some industries held back on production on demand concerns for later in the year due to the oil price shock.”
The leading indicator is one of three composite business cycle indicators analysed by the Sarb to establish whether a reference turning point has occurred in the business cycle. It predicts economic activity several months ahead, while the coincident indicator reflects present activity and the lagging indicator confirms past changes.
The coincident indicator was unchanged in March as an increase in the real value of wholesale, retail and motor trade sales was offset by a decrease in the industrial production index, the Bank said. The lagging indicator was up 0.9% month on month in March.
Some of the negative contributors to the leading business cycle indicator were money supply, the number of building plans approved, the RMB/BER business confidence index, job advertisements, new passenger vehicle sales and the interest rate spread between 10-year government bonds and 91-day Treasury bills.
They also included the average hours worked per factory worker in manufacturing as well as the commodity price index for South Africa’s main export commodities.
The positive contributors were the volume of domestic orders in manufacturing and the composite leading business cycle indicator for South Africa’s major trading-partner countries.
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