Abstract
In the 10 years following the global financial crisis, the South African economy was characterised by various structural supply-side constraints, heightened uncertainty and fairly volatile output growth. This chapter employs the indicator approach to business cycle analysis, in particular, the SARB’s composite leading business cycle indicator, to establish whether the current downward phase in the South African business cycle could reasonably have been predicted, and also whether the recent strong increase in the composite leading business cycle indicator provided a clear signal that the downward phase might have ended. The results show that the leading indicator and its subcomponents predicted a broad slowdown in the South African economy from 2012. Also, the recent upward trend in the leading indicator did initially signal the end of the current downward phase in the business cycle in an unambiguous manner. However, the strength of the lower turning point signal was weakened by idiosyncratic exogenous factors.
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Notes
- 1.
The chronology of turning points determined by the South African Reserve Bank refers to growth cycles. See the earlier chapter by Boshoff and Du Plessis (2020) for an overview of cyclical concepts and subsequent discussion in the next section.
- 2.
The chronology of business cycle turning points regularly published on the last page of the SARB’s Quarterly Bulletin represents growth cycle turning points, i.e. trend-adjusted business cycle turning points.
- 3.
For 2015, the consensus forecast for April was used instead of January, since that was the first month in that year for which annual average forecasts for the current year (2015) and the subsequent 2 years were available.
- 4.
See also Boshoff (2005), showing that no individual financial variable can act as a consistent leading indicator for the South African business cycle.
- 5.
The 6MSAR in the leading indicator dipped below zero in July 2011 already, and remained below zero in all but 2 months up to September 2012.
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Venter, J.C. (2020). Assessing the 2013 and 2017 Business Cycle Turning Points Signalled by the SARB’s Composite Leading Business Cycle Indicator. In: Boshoff, W. (eds) Business Cycles and Structural Change in South Africa. Advances in African Economic, Social and Political Development. Springer, Cham. https://doi.org/10.1007/978-3-030-35754-2_9
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