After a stronger-than-expected first half of the year, economic activity, measured in the BankservAfrica Economic Transactions Index (BETI), levelled off in the final months of 2023.

The November index reading reflected another disappointing month, moderating to the same level as a year ago.

“With an index level of 130.4 in November 2023, the BETI reached the exact same figure as November last year and slipped from the revised 130.8 recorded in the previous month,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

This data confirms that 2023 was a “tale of two halves” as economic activity surprised on the upside in the first half of the year and reversed these gains in the second half of the year.

“The record spate of load shedding, elevated interest rates, a lacklustre job market and low confidence levels have led to the economic narrative remaining underwhelming,” said Elize Kruger, Independent Economist.

“Despite the growing number of industries improving their resilience in recent months, the economy remains unable to gain sustainable momentum.”

The cumulative impact of the many challenges that have been playing out in the economy over the past 18 months has reached its harshest as confidence levels remain under severe pressure, and there’s no clear end in sight for the ongoing challenges, Kruger said.

According to BankservAfrica, the renewed upward trend in inflation indicators in recent months has had a negative impact on the BETI as it is expressed in real terms.

The spike in consumer inflation, from 4.8% in August to 5.4% in September and further to 5.9% in October, was mostly driven by renewed pressure on the rand exchange rate with negative consequences for imported prices, higher food prices and notable fuel price hikes.

However, the international oil price has subsided in recent weeks, which should result in a reversal of the bulk of recent fuel price hikes – something already seen helping ease inflation for November to 5.5%.

Still, inflation remains somewhat above the mid-point of the South African Reserve Bank’s 3-6% target band, the group said, and as such, interest rates are forecast to remain at elevated levels in the coming months.

“There are already clear signs of stress among households resulting from weaker household finances, higher interest rates, fragile consumer confidence and cautiousness among lenders. Muted Black Friday sales are a testament to these realities, while we expect the December holiday period to reflect a continuation of this trend,” said Kruger.

Other nowcast indicators confirmed the muted economic activity in November.

The S&P Global South Africa Purchasing Managers’ Index rose to the neutral value of 50.0 in November, up from 48.9 in October.

However, this was partly due to a sharp lengthening of supplier delivery times, which normally implies strong demand conditions and thus contributes positively to the composite gauge.

In November, the intensification of the Durban port crisis was the main driver of the sharp decline in supplier performance, with firms seeing lead times lengthen considerably.

The Absa Purchasing Managers’ Index increased somewhat to an index level of 48.2 in November but remained below the 50-level for the tenth consecutive month, confirming ongoing strain in the manufacturing sector.

South African vehicle sales declined for the fourth month in a row in November as the logistics crisis and escalated load shedding took a toll. According to the Automotive Business Council, Naamsa, 49,986 new vehicles were sold in South Africa last month, a 9.8% year-on-year decline.

“The BETI readings for the first two months of Q4 indeed signal that the economic hardship has continued. With a quarterly contraction in real GDP already recorded in Q3 – anticipated in previous BETI reports – this will spur the possibility that the economy could have dipped into a technical recession in Q4,” said Kruger.

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