Trade conditions deteriorate in July

Tuesday, August 16, 2011

Pretoria - Trade conditions deteriorated sharply in July, says the South African Chamber of Commerce and Industry (SACCI).

Current trade conditions, as reflected by the Trade Activity Index (TAI), dipped further into negative territory, registering a seasonally adjusted 38 in July after recording 47 in June.

In February, it reached a seasonally adjusted 55. The index wavered between positive and negative territory in the months that followed.

"The magnitude of the further deterioration in July 2011 is substantially greater than anticipated," SACCI said on Tuesday.

In July 2010, the TAI stood at a seasonally adjusted 49. The TAI on an unadjusted basis was in negative territory since April 2011 and declined by 16 points since it registered 54 in March. The sales volumes index declined to 39 after dipping to 50 in June, following the 56 it registered in May.

All of the other components of trade activity except for sales prices performed worse than in June. The input price index increased by six index points after declining marginally in June. The sales price index remained unchanged at 56 after declining from 61 in March and April 2011. SACCI said inflationary pressures are currently contained but vulnerable to cost push pressures.

"The strike season had a sobering effect on employment conditions with the index on employment in the trade environment dipping to 42 after it stood at 48 in June," said SACCI.

The employment prospects index worsened to 46 after bordering on 50 in June.

"With performance in the trade environment deteriorating severely, it is not able to afford above-inflation wage increases. The claims by labour in the business environment are likely to severely dampen employment prospects in this sector as well. The potential implications for employment in the broader economy is concerning," noted SACCI.

The Trade Expectations Index (TEI) stood at 52 points, 13 points below the February level and continued its declining trend.

In July, the outlook on all elements of the trade expectations survey - except for supplies, inventory levels and prices - deteriorated. The index on sales expectations declined by a further seven points to 58, while the expected new orders index dropped by six points.

The expected supplies index improved to 54 from 52 in June, indicating easier supply conditions.
The index on expected inventories remained unchanged at 47.

In July, the sales and inputs price expectations indices declined by two and six points respectively to 62 and 66.

"However, rising costs such as fuel and other utility services are putting trade margins under continual pressure. Claims for wage and salary increases well above general inflation are also adversely affecting the ease of doing business in the trading environment," said SACCI.

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