Weaker Inflation Sees Rise In Economic Transaction Activity
South Africans have had a bleak economic outlook for this year amidst a depreciating currency, slow growth, flailing investment due to political uncertainty, downgrades and an unemployment rate that is now over 27% with many of its ordinary citizens being forced to consult debt advice agencies and sign up to debt consolidation solutions. And it seems there is no silver lining in sight yet, even though the latest BankservAfrica Economic Transactions Index (BETI) indicates that economic transactional activity has increased in real terms in July when measured year-on-year.
BankserveAfrica reports that the monthly transactional activity (as calculated by their national payment system) showed a 0.6% annual increase for July in the real value of transactions. This was due largely to a weaker inflation which was down to 4.6%, the lowest it’s been for a couple of years. Mike Schüssler, chief economist at Economics dotcoza, explains that this variation is due to the poor July 2016 results which saw a drop in transaction values. He believes that the annual increase is a ‘base effect’ that raises the actual index numbers above the lows of the previous year.
The quarterly outlook, unfortunately, remains negative due to the very low BETI figures for May 2017 which are the knock-on effect of South Africa’s recent credit rate downgrades. Schüssler believes that the BETI figures show that consumers are still cautious about spending and will for instance rather eat at a cheap fast food joint than dining at an upmarket restaurant. Most South African households are living beyond their means with many resorting to reckless lending schemes to keep head above water amidst rising house, utility and food costs. They have already committed to debt counselling and debt review plans to rid themselves of debt and are thus hesitant about further spending.
The BETI shrunk by 0.2% between June and July which is marginal if compared to other declines seen in South Africa since 2015. Whilst the number of transactions in July rose by 6.7% if measured on an annual basis, the typical value per transaction actually decreased by 1.3%. July showed a 5.4% annual improvement as the standardized value of transactions amounted to R789.2bn.
The last 43 months have shown one month with zero monthly changes in the BETI, 21 with declines and 21 with increases which all point to a flat economy, says Schüssler. He further comments that “There is hope that further interest rate reductions will boost consumer confidence and a better understanding of the economic situation by policymakers will help the SA economy.”
With the South African economy remaining volatile and stagnant, it is now more important than ever to employ savvy saving tips to save for your retirement and any unforeseen expenses if you want to escape a life riddled with debt and consolidation loans.