Ten separate measures go into the Reserve Bank's forward read on the economy, and in July six of them went the wrong way. The composite leading business cycle indicator, which is the index built to signal where activity is heading several months out, fell 0.9% for the month. That is its second drop in a row, after a revised 1.0% fall in June.
The Bank reads that index alongside two others. A coincident indicator tracks what the economy is doing now, and a lagging indicator confirms what it has already done. Both run a month behind the leading index, and in June the coincident measure slipped 0.1%, mostly on weaker real wholesale, retail and motor trade sales, while the lagging one edged up 0.2%.
The plans that were not filed
The two biggest drags were both about money that has not been committed yet. The first was a slowdown in the six-month smoothed growth rate of real M1 money supply, which is the cash and current-account balances households and firms can spend immediately. The second was a drop in the number of residential building plans approved for flats, townhouses and houses larger than 80 square metres. Behind them sat softer dollar prices for South Africa's main export commodities, a basket of 21 that leans on gold, platinum and ruthenium alongside base metals and coal, fewer new passenger vehicles sold, and thinner order books in manufacturing.
Four components pulled the other way. Job advertisements carried by the Sunday Times and the online recruitment platform Pnet grew faster, factory workers put in longer average hours, and the leading indicators of South Africa's main trading partners improved. The fourth was a wider gap between what the state pays to borrow for ten years and what it pays for 91 days.
Confidence at 38
Business confidence is the component with a mood attached to it. The Bureau for Economic Research's index slipped a point to 38 in the third quarter, with 62% of the firms surveyed dissatisfied with the conditions they are trading in. That sits under the long-term average of 40 and well off the 47 the index reached in the first quarter of this year. Companies told the BER they were worried about municipal service delivery, poor infrastructure and policy uncertainty, and many of them reported weak demand for what they make.
Investec economist Annabel Bishop reads July's fall as the oil price shock from the Middle East war still working through new orders in manufacturing and other industries. The BER's own answer is closer to home: it expects the local government elections on 4 November to be the thing that decides sentiment for the rest of the year.
