Picture: 123RF/NIRUT
Picture: 123RF/NIRUT

The SA Reserve Bank’s composite leading business cycle indicator plunged in April, as SA experienced the harshest phase of the nationwide lockdown imposed to slow the Covid-19 pandemic.

The leading indicator, which offers a projection of SA’s economic growth cycle for the next six to 12 months, decreased 8.7% on an annual basis during April, recording its 18th month of consecutive declines. On a month-on-month basis the leading indicator decreased 5.1%.

Distortions created by the lockdown affected some of the underlying data series, resulting in downward revisions for March’s data, with the annual change revised from a decline of 1.6% to a steeper fall of 3.1%. Meanwhile, the month-on-month figures for March were revised from a 0.7% increase to a decline of 0.9%

The leading indicator measures changes in a range of components over time, including among others the number of approved building plans, job advertisement space, manufacturing order volumes and passenger vehicles sold.

“The exogenous nature of the Covid-19 pandemic implies that it was not possible for the composite leading business cycle indicator to have predicted its impact on economic activity in advance,” the Bank said in the data release. But the gradual downward trend in the leading indicator “suggested a slowdown in real economic growth even before the start of the pandemic.”

Even before the Covid-19 pandemic hit, SA had been languishing in the longest downward phase of the business cycle since the World War 2. Before the pandemic, SA was battling to surface from a recession in the last half of 2019, hampered by rolling power cuts during the early months of 2020.

Though the economy began reopening activity at the start of June the impact on growth and employment is expected to be severe, with the Bank expecting growth to shrink by 7% in 2020.