Absence of load-shedding and formation of government of national unity bode well for GDP growth
Absence of load-shedding and formation of government of national unity bode well for GDP growth
Economic activity improved in July, driven by about four months of uninterrupted power supply and a positive reaction to the outcome of the general elections and the subsequent formation of a government of national unity (GNU), a survey shows.
The BankservAfrica Economic Transactions Index (BETI) for July increased 0.5% to reach an index level of 136.7, higher than a revised 136.1 in June, and the highest 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.
The number of transactions cleared through BankservAfrica spiked to 162.9-million in July, the second-highest on record, from 147.4-million in June. The standardised nominal value of transactions, however, moderated to R1.283-trillion in July versus R1.290-trillion in June.
The index has already signalled that the economy probably rebounded in the second quarter after contracting 0.1% in the first three months of the year, and the latest release suggests the economy is off to a good start in the third quarter. SA’s GDP grew 0.7% in 2023.
Stats SA is scheduled to release second quarter GDP data at the beginning of September. The Reserve Bank’s monetary policy committee expects GDP growth of 0.6% for the second quarter and predicts the economy will grow by an average of 1.1% this year.
According to BankservAfrica, the election outcome and formation of the GNU triggered an initial positive market response, shown by the favourable movements in the rand exchange rate, government bond yields, and credit default spreads.
“This positive sentiment, fuelled by the potential for a better outcome for SA in the medium term in combination with the ongoing reprieve from load-shedding, is already reflecting in economic activity indicators such as the Absa purchasing managers’ index (PMI) and vehicle sales during July. These are early indications of near-term economic recovery and confirm the trend evident in the BETI,” said independent economist Elize Kruger.
The Absa PMI, which is published by the Bureau for Economic Research (BER) beat expectations, improving by 6.7 points to 52.4 in July. The BER said the rebound was likely to have been the result of stronger domestic and global demand filtering through to higher business activity and new sales orders. It also reflected improved confidence of the formation of the GNU and stabilising electricity supply.
The latest data from Naamsa shows domestic new vehicle sales hit 44,229 units in July, reflecting an increase of 657 units, or a gain of 1.5%, up from the 43,572 vehicles sold in July 2023.
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