Reserve Bank’s leading indicator slips for 11th straight month

The SA Reserve Bank’s composite leading business cycle indicator fell for the 11th consecutive month in August on an annualised basis, again confirming that SA's fragile economy is struggling to gain momentum.

The indicator fell 1.3% to 103.8 points, slightly better than the 103.7 expected in the Bloomberg consensus.

The indicator is a strong projection of SA’s economic growth cycle for the next 6-12 months. It has consistently shown that local businesses are holding back on investment, and that the confidence boost that followed President Cyril Ramaphosa’s ascent to the presidency in early 2018 has faded. 

The indicator fell 0.1% month on month, the Bank said in a statement on Tuesday. Decreases in five of the 10 available component time series outweighed increases in the remaining five.

The largest negative contributions to the movement in the composite leading business cycle indicator in August came from a decrease in the SA export commodity price index (dollar based) and a deterioration in the BER’s business confidence index.

The largest positive contributions came from an increase in the number of residential building plans approved and a widening in the interest-rate spread.

The Bank compiles the leading indicator by assessing monthly movements in various economic indicators such as building plans passed, commodity prices and new passenger vehicles sold.

The composite coincident business cycle indicator, which moves in line with current economic growth, decreased 0.4% in August from the previous month.

gernetzkyk@businesslive.co.za