Latest news with #BankservAfricaEconomicTransactionsIndex
The Citizen
11-06-2025
- Business
- The Citizen
Economic activity picked up for the first time in 8 months in May
It is good news, but there are still many risks that could bring the economic activity down again. Economic transactions picked up in May for the first time in eight months, bringing some relief after months of stagnation. A part of May's improvement stems from wiping out the weakness evident in the index in April. According to the BankservAfrica Economic Transactions Index (BETI), which measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity rebounded in May, although it is too early to tell if this positive trend will hold. Shergeran Naidoo, head of stakeholder engagements at BankservAfrica, says the BETI improved to an index level of 138.3 in May, up from the 136.2 recorded in April, breaking an eight-month trend of sideways movement. Despite the shift, notable risks remain, and more evidence of sustained higher economic activity must be delivered before the narrative of a subdued growth environment can change. 'The number of transactions cleared through BankservAfrica in May reached an all-time high of 176.3 million compared to 167.9 million in April, surpassing the previous record of 172.4 million in March 2025.' ALSO READ: Economic activity in SA struggling to gain momentum Too early to call a change in the trend for economic activity Elize Kruger, an independent economist, says while the latest figure is encouraging, it is too early to call an imminent change in trend as the economic environment has not changed materially in May, and notable risks remain. 'In addition, the recovery in economic activity in May followed the month of April when the world was hit by the US announcement of punitive import tariffs, and subsequently an evolving trade war developed with a great deal of volatility from day to day as markets plummeted and global and local growth forecasts were slashed. 'Confidence levels across the globe and in South Africa were knocked by the sheer uncertainty that these developments brought. 'However, with some tariffs put on ice and several countries entering, more favourable trade agreements, averting a worst-case scenario. Markets responded with relief rallies and a cautious return of confidence, albeit from a low base.' However, she says, the BETI is still 1.4% higher, and the uptick remains encouraging as all of its components increased in value terms during May. 'The most notable performances were the heavily weighted EFT credits, Real Time Clearing and PayShap transactions. 'The standardised nominal value of transactions also increased to R1.351 trillion in May compared to R1.320 trillion in April, with the resultant average value per transaction covered in the BETI increasing to R7 618, higher than April's R7 485. 'All payment streams increased in both volume and value terms during May.' ALSO READ: Economic activity still moving sideways but optimism increases Two PMIs and new car sales also added to increased economic activity Kruger says two other timeous economic indicators also posted stronger readings. The S&P Global South Africa Purchasing Managers' Index increased to 50.8 in May, driven by the sharpest uplift in private sector output in four years. Naamsa also reported that the strong momentum in the local vehicle sales market continued into May 2025. Total vehicle sales increased by 22%, with year-to-date sales up by 12.6% compared to the same period a year earlier. New car sales surged by an impressive 30%, while year-to-date, sales were a notable 21.2% higher. On the other hand, she points out that the seasonally adjusted Absa Purchasing Managers' Index (PMI), reflecting on prospects in the manufacturing sector, remained in contractionary territory for a seventh consecutive month at 43.1 index points. 'Furthermore, the BETI rebound is a timely development, given that the economy started 2025 on the backfoot as seasonally adjusted quarterly growth of only 0.1% was registered in the first quarter with sectors such as mining, manufacturing and construction now in technical recession.' says Kruger. ALSO READ: Structural reform is silver bullet needed for SA economy to grow – OECD Economic growth adjusted downward, but inflation stays low While economic growth forecasts for 2025 have been revised downward, with the latest Reuters consensus among economists now projecting real gross domestic product (GDP) growth at 1.2%, down from 1.7% in January. Carpe Diem Research offers an even more cautious outlook, forecasting growth at just 1.0%. On the more positive side, Kruger says local inflation remains well under control, with headline inflation at 2.8% in April, below the target band of the South African Reserve Bank (SARB) of between 3-6%, with the average 2025 forecast around 3.4%. 'The favourable inflation environment created ample scope for the Sarb to cut interest rates. Even after a 25 basis points cut in May, the repo rate remains quite high at 7.25%, as real interest rates are still considered punitive for an economy muddling along, unable to gain meaningful momentum.' Kruger also points out that, helped by some weakness in the US dollar, the rand exchange rate recovered all of its losses after the US 'Liberation Day' announcements and trading at fairly strong levels. 'The low inflation rate will play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real increases in salaries, which should support consumer spending.'
The Citizen
14-05-2025
- Business
- The Citizen
Economic activity slows in April as economy struggles
Although the South African economy is muddling along, there is some hope thanks to low inflation, low fuel prices and a strong rand. Economic activity has slowed in April as the economy struggles with downside risks, such as the United States' (US) punitive import tariffs, plummeting markets and sharply lower forecasts for global economic growth. According to the BankservAfrica Economic Transactions Index (BETI), that measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity slipped in April. 'The BETI reached its lowest level of the year of 136.4 in April, down by 0.6% on the 137.2 recorded in March,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says. Although the BETI is still 1.5% higher than a year ago, the slowdown reflects the impact of April's announcement of U.S. punitive import tariffs, which marked the beginning of a developing trade war leading to daily volatility, plummeting markets and slashed global growth forecasts. Elize Kruger, an independent economist, says confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on. 'Low confidence and uncertainty are detrimental to economic activity, as investors and households hold back on spending decisions until there is more clarity.' ALSO READ: Economic activity in SA struggling to gain momentum Good news for local economy despite global setbacks However, despite global setbacks, positive factors are expected to support economic activity in 2025, she says. 'While the overall effect of global developments is negative for the South African economy, prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points, several offsetting factors are offering some relief. 'The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses. Many South African export commodities also remain exempt from US tariffs, providing potential support for the mining sector and broader economy.' Kruger points out that other economic indicators were mixed in April, sending conflicting signals about the strength of the economy. The S&P Global South Africa Purchasing Managers' Index rose to 50.0 in April, increasing from 48.3 in March, after four months in negative territory. ALSO READ: SA's economic growth outlook growing increasingly dim Manufacturing is struggling, but car sales are recovering Meanwhile, the seasonally adjusted Absa Purchasing Managers' Index (PMI) remained in contractionary territory for a sixth consecutive month. Data from Statistics SA also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions. However, encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025. 'All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting an improvement in household budgets due to lower inflation and interest rates,' Kruger says. ALSO READ: Increased unemployment rate red flag for weak economic growth Pockets of excellence in local economy will help economic activity 'With some pockets of excellence in the South African economy, such as in the renewable energy, automotive and financial sectors and positive developments relating to the de-escalation of the global trade war in recent days, such as the trade deals between the US and UK and China, the South African economy can regain momentum in the second half of the year.' Kruger says the launch of the second phase of Operation Vulindlela is also a positive development, confirming government's commitment to push forward on much-needed structural reforms. After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but it was still 7% up on a year ago. The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction tracked in the BETI continuing on its downward trend to R7 482. ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert Structural tailwinds will push up economic activity Kruger says some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments. With inflation currently at 2.7%, below the South African Reserve Bank (Sarb) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50 basis points. 'Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,' she says. At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%. Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar and is trading at fairly strong levels, Kruger says. 'The low inflation rate will also play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending.'
