December’s business cycle leading indicator was 104.6 points, slightly down from November’s 105.2 points, the Reserve Bank reported on Tuesday morning.

The leading indicator foreshadows the business cycle by six months.

Despite the small dip in December, the average for the fourth quarter of 2017 was a huge improvement on prior quarters. The index fell below 100 points in 2016 and 2015.

Investec Bank economist Annabel Bishop said in a note e-mailed on Tuesday that the 105.2-point average for the December quarter pointed to SA’s gross domestic product (GDP) growth in the second quarter of 2018 beating 2%.

"The positive relationship between business confidence, fixed investment and GDP growth means that SA is likely to experience faster economic growth in 2018 than in 2017," Bishop said.

"President Cyril Ramaphosa recognises this relationship, and an investment summit is consequently planned to take place within the next three months to interact with local and foreign investors on key issues to promote investment."

Five of the components the Reserve Bank uses to calculate its leading indicator rose: the number of building plans passed; the dollar-based commodity price index; real money supply defined as M1; the volume of orders in manufacturing new passenger vehicle sales; and job advertisements.

The indicators that fell in December were the number of new passenger vehicles sold, the average hours worked per factory worker in manufacturing, the leading indicator for SA’s major trading partners and the interest rate spread.

"The key determinant of whether SA will receive a downgrade from Moody’s — the last key agency to hold the sovereign on investment grade — is Wednesday’s budget," Bishop said.

"Fiscal consolidation is needed, but not to the point of strangling economic growth, and so cuts in actual expenditure and borrowings projections remain crucial."