Johannesburg - South Africa's leading indicator for the business cycle jumped 11,6 percent in November, sending a strong signal that the economy's recovery is on track.
This is the indicator's its biggest rise in more than five years, giving analysts that the country's economy is in an upswing.
Data on the South African Reserve Bank's composite lead indicator released this week show it rose in November for the eighth month in a row, from 116.5 in October to 119.8.
As 10 of its 12 components came in positive, the composite indicator was 2.8 percent up in the month and nearly 12 percent higher than in the same month of the previous year.
The indicator peaked at 127 in March 2007 and hit a trough of 104.5 in March last year.
The composite leading indicator, compiled by the bank with data from surveys, share prices and SA's trade partners, predicts trends in the economy in six to 12 months.
On a year-earlier comparison, the index has been climbing since April last year. It rose 5,9 percent year on year in October.
In November, the only negative component was the spread, or difference, between interest rates on 10-year government bonds and 91-day treasury bills. When the outlook is good, long-term rates are significantly higher than short-term rates.
Iaan Venter, an economist at the SA Reserve Bank, was quoted as saying while long rates remained higher in November, they were "slightly less so than in the previous month".
One component of the composite index was unavailable for November: gross operating surplus (pretax profit) as a percentage of gross domestic product.
According to Venter, this ratio was negative in the third quarter.
Business Report quoted Annabel Bishop, the group economist at Investec, as saying:
"The strong upward trend in the leading indicator indicates that the business cycle will recover significantly this year."
She also forecast annual economic growth of 2.5 percent followed by growth of 3.7 percent next year, "with 2012 seeing a move above 4 percent, both locally and globally".
John Loos, a strategist at First National Bank who expects gross domestic product growth of two percent to 2.5 percent this year, said the composite index was rising at an accelerated pace - from six percent in October.
He added that there could be better news ahead: "It is likely that some of last year's rate-cutting stimulus still has to be felt early in 2010."
The reserve bank cut its repo rate from 12 percent in December 2008 to 7 percent in August last year.
