Economic transactions see modest rebound in October after weak September

Financial infrastructure services company BankservAfrica's Economic Transactions Index (BETI) showed a steady recovery in October, up 0.3% to 136.5, following September’s weaker performance of 136.1.

The October BETI is up by 4.5% year-on-year. This latest movement indicates growing momentum in economic activity, confirming improved conditions since the BETI’s turning point in November 2023, the company says.

Following two months of lower volumes, the number of transactions cleared through BankservAfrica in October increased to 167.8-million, up from 156.7-million in September, representing a 7.1% year-on-year growth and an all-time high.

The standardised nominal value of transactions increased by 1% moderately to R1.32-trillion in October 2024 from R1.3-trillion in September.

The October BETI signals that the underlying momentum in the economy is picking up, reflecting improved economic conditions.

“Compared to the turning point in November 2023, the BETI is up by 4.3%, signalling that the economic recovery continues to unfold,” says independent economist Elize Kruger.

Improved confidence levels and more tangible shifts in the economic environment have led to activity gaining momentum relative to previous months.

“Consumers are currently experiencing moderating consumer price inflation, slightly lower interest rates, and real increases in salaries and wages; all of which should contribute to an improvement in purchasing power in the fourth quarter of the year,” says Kruger.

An additional tailwind is the potential that some of the proceeds from the two-pot retirement withdrawals could boost retail spending. At the end of October, the South African Revenue Service indicated that 1.7-million individuals had applied for just short of R30-billion worth of withdrawals.

These factors combined are likely to contribute to brisk retail spending during November, which also includes Black Friday, she notes.

Further, consumer inflation has moderated to 3.8% in September from 5.9% in October 2023. The forecast for October is 3% year-on-year, the lowest since February 2021.

Headline consumer price inflation is forecast to stay below 4% for the next six to nine months, suggesting a sustained period of low inflation, on the assumption of relative rand stability, she adds.

Therefore, consumer inflation is forecast to average at 4.5% in 2024 and 2025, aligning with the mid-point of the South African Reserve Bank’s 3% to 6% target band, and opening more room for lower interest rates in the next few Monetary Policy Committee meetings.

“Provided no unexpected developments arise locally and abroad, the repo rate is forecast to reach a level of 7% by mid-2025 and reflect cumulative relief of 125 basis points in a fairly shallow cycle.

“The potential impact of Donald Trump’s recent victory in the US elections is likely to be more of a medium-term factor and should not derail our near-term expectations for interest rate developments in South Africa,” Kruger says.

“Overall, these favourable conditions are expected to drive a strong year-end finish, particularly in retail spending, bringing a positive boost for the economy,” she says.