Businesses in South Africa continue showing signs of a turnaround after the composite leading business cycle indicator rose for the third month in a row in November, giving hope that the economy will rebound in the three months to December 2024 following a 0.3% slump in the third quarter.
The South African Reserve Bank on Tuesday said the composite leading business cycle indicator rose by 0.6% month-over-month in November 2024, from 1.1% in the previous month.
This marked the third consecutive month of expanding economic activity, driven largely by increases in five of the 10 component time series, which outweighed the decreases in four others, while one component time series remained unchanged.
The largest positive contributors were the accelerated six-month smoothed growth rate in the number of new passenger vehicles sold and an improvement in the RMB/BER Business Confidence Index.
Aggregate domestic new vehicle sales in November 2024, at 48 585 units, reflected an increase of 3 658 units, or a gain of 8.1%, from the 44 927 vehicles sold in November 2023.
The Automotive Business Council said that a second consecutive increase in the monthly new vehicle sales signalled the start of the long-awaited upward trend in the new vehicle market.
Meanwhile, the RMB/BER Business Confidence Index rose to 45 index points in the fourth quarter of 2024, up from 38 in the third quarter, meaning that just under half the respondents were satisfied with prevailing business conditions.
This was the third consecutive increase, which put the index almost 20 points above a recent low of 27 reached in the second quarter of 2023.
The rise in sentiment was supported by an improvement in activity and better business conditions relative to the third quarter and respondents were upbeat about business conditions in the next quarter.
Conversely, the largest negative contributors were a deceleration in the six-month smoothed growth rate in the real M1 money supply and a decrease in South Africa’s US dollar-denominated export commodity price index.
The composite leading indicator is an index designed to provide early signals of turning points in business cycles showing fluctuation of the economic activity around its long-term potential level.
Investec chief economist, Annabel Bishop, said the leading indicator was indicating a rise in gross domestic product (GDP) for the third quarter of 2025 versus the second quarter of 2025 on the six-month lead on economic activity the indicator signifies.
Bishop said interest rate sensitive areas, benefiting from the rate cuts, contributed positively to the leading indicator including building plans passed, sale of new vehicles, business confidence, hours worked per factory worker and volume of manufacturing orders.
“The GDP data is not out for the fourth quarter of 2024 but is expected to see a big rebound of 1.8% quarter-on-quarter, both on the contraction in the third quarter if the figure is not revised, and a lift in expenditure on retirement savings withdrawals and interest rate cuts,” Bishop said.
“The weakness in the global economy persisted, and the global commodity price index for SA’s main exports made a negative contribution, along with the composite leading business cycle indicator for South Africa’s major trading partner countries.
“South Africa’s business cycle is expected to improve this year, with a strengthening in GDP growth with improved infrastructure investment and corresponding delivery and a strengthening in consumer spend.”
BUSINESS REPORT