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We take a look at the latest business cycle indicators (BCI) released by the South African Reserve Bank (SARB). While we are not the greatest fans of the these indicators as they offer little to no guidance on where the economy is going in the interest of giving our readers as broad a range of opinions and economic indicators we take at the numbers for January 2020 below.
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South African Reserve Bank
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The South African Reserve Bank Business Cycle Indicators for January 2020
- The composite leading business cycle indicator increased by 0.5% on a month-to-month basis in November 2019. Six of the ten available component time series increased while four decreased. The largest positive contributions to the movement in the composite leading business cycle indicator in November came from an acceleration in the twelve-month percentage change in job advertisement space and an improvement in the BER’s Business Confidence Index. The largest negative contributions came from a decrease in the number of residential building plans approved and a deceleration in the six-month smoothed growth rate in the real M1 money supply.
- The composite coincident business cycle indicator increased by 0.5% on a month-to-month basis in October 2019.
- The composite lagging business cycle indicator increased by 0.9% on a month-to-month basis in October 2019.
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While the summary from the South African Reserve Bank is all fine and dandy, it doesnt really discuss what makes up each of these indicators or what exactly they aim to measure or explain or forecast. So we will cover it in a bit more detail as well as provide a chart for each of these indicators to provide an overview of how the various indicators have performed over time.
Leading Indicator
Leading Indicator
The leading indicator is calculated with the aim of looking to provide a forward looking view (forecast) of the future movement of the South African economy and business activity. Over time we have mapped the leading indicator against actual economic activity as measured by South Africa's GDP
Coincident Indicator
Coincident Indicator
The coincident indicator is calculated with the aim of providing a feel for what the economy and business conditions are like as and when it happens. So this is less forward looking than the leading indicator and more focused on the here and now. And readers will notice that the charts for the leading indicator and the coincident indicators are totally different, this is due to the different aims as well as data sources.
Lagging Indicator
Lagging Indicator
The lagging indicator looks to track the economy and business activity after the fact, or after its happened. And this indicator is based on a more complete data set that has been updated and or revised. In theory this indicator should be the closest in terms of its behaviour to that of the GDP data published for Statistics South Africa.
Again the chart for the lagging indicator is different to that of the coincident and leading indicators, which essentially says these three indicators cannot be compared with one another in order to determine whether the leading indicator is a good indicator for where the coincident or lagging indicator is heading or whether the coincident indicator is a good indicator of where the actual economy or lagging indicator is heading.
Again the chart for the lagging indicator is different to that of the coincident and leading indicators, which essentially says these three indicators cannot be compared with one another in order to determine whether the leading indicator is a good indicator for where the coincident or lagging indicator is heading or whether the coincident indicator is a good indicator of where the actual economy or lagging indicator is heading.