Economic transaction index slows in February

The BankservAfrica Economic Transaction Index slowed to a 3.8% year-on-year increase in February from a 4.1% rise in January.

The BankservAfrica Economic Transaction Index (Beti) is the broadest and earliest business cycle indicator on the economic calendar and gives the fastest overview of South African growth trends. It is the result of co-operation between BankservAfrica and Mike Schussler.

The indicator closely tracks some 80% of all economic transactions outside of debit and credit cards and, of course, cash. These transactions would be used to pay for goods and services that South Africans use.

In 2011 the Beti tracked 844 million transactions with a value of over R6.3 trillion. Schussler estimated that the Beti represented about one third of all economic transactions, by value.

"The Beti has a very good correlation with GDP growth as well as the co-incident indicator of the South African Reserve Bank (SARB). However, unlike GDP, which is released quarterly with a six-week lag, the Beti is released monthly with only about a 14-day lag. At times the Beti will give an indication of the overall economic cycle up to three months in advance," Schussler explained.

Furthermore, the Beti leads the SARB co-incident indicator by about one month and is available about up to three months earlier whilst having a very close relationship here, too. The Beti, therefore, gives analysts and policy makers up to four months more notice on economic conditions in SA.

The February Beti indicated that South African consumers, already feeling the pinch with low growth rates, looming fuel hikes and toll fees, were in for tougher times as the economy slowed down following a spurt of relatively strong growth towards the end of last year.

According to the Beti the South African growth rate has slowed over the last five months, with the three-month smoothed Beti showing a growth rate of only 3.4%. Simply put, South African growth had in all likelihood reached its peak and was in a downward cycle.

"The point is that the worldwide slowdown is also being felt in the South African economy. However, unlike many developed countries, SA still has positive growth," said Brad Gillis, BankservAfrica regulated business CEO.

"In the next few months, expect more evidence of a slowdown as more and more data is going to point that the South African economic expansion is losing steam. We believe that until the smoothed Beti sees a trend reversal of over 4.5% it is unlikely that the expansion will pick up momentum again. But, similarly, until the smoothed Beti goes below 1% it is unlikely that the South African economy will be in a recession," Schussler added.

"The economy is still growing - we have hit a bit of a speed limit. The speed limit may fall away again, but we think the Beti shows we have hit a suburban speed limit. It will probably be some time before we reach highway speeds again," he noted.