The Reserve Bank’s composite leading business cycle indicator gained 0.4% month on month in January, driven by an increase in South Africa’s dollar-denominated export commodity price index and an improvement in the RMB/BER business confidence index.
The indicator increased to 118.2 points in January from 117.7 in December and is up 4.8% year on year from 112.8 points in January 2025.
“The readings are indicative of an expansion in economic activity,” said Investec economist Annabel Bishop said.
The leading indicator is one of three composite business cycle indicators that are grouped together according to their ability to lead, coincide with, or lag movements in the business cycle.
The leading indicator predicts activity, while the coincident indicator moves with the economy — reflecting current activity through metrics such as industrial production and sales — and the lagging indicator confirms past changes such as the unemployment rate or bank interest rates.
The components sampled include export commodities, business confidence, the average number of hours worked per factory worker in manufacturing, building plans approved, new passenger vehicle sales, manufacturing sector domestic orders, interest rates, government bonds, treasury bills, money supply and job advertisements.
The largest positive contributors to the composite leading business cycle indicator in January were an increase in South Africa’s dollar-denominated export commodity price index and an improvement in the RMB/BER business confidence index, the Bank said.
The main negative contributors were a deceleration in the six-month smoothed growth rate in the number of new passenger vehicles sold, as well as a retreat in the volume of domestic orders received in the manufacturing sector.
The composite coincident business cycle indicator dipped 0.2% to 95.4 points in December compared with November, due to decreases in the industrial production index and the real value of wholesale, retail and motor trade sales, the Bank said. The index was also down 0.2% year on year.
The composite lagging business cycle indicator ticked up by 0.1% to 105.8 points month on month in December, but was down 1.9% compared with the same period in 2024. - Business Day
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