Trade conditions in negative territory in June

Tuesday, July 12, 2011

Pretoria - Trade conditions in June dipped into negative territory, the South African Chamber of Commerce and Industry (SACCI) said on Tuesday.

Releasing its monthly report, SACCI said current conditions reflected by the Trade Activity Index (TAI), measuring a seasonally adjusted 47 in June after a 50 reading in May 2011, dipped into negative territory.

After achieving a seasonally adjusted level of 55 in February 2011, the TAI vacillated between positive and negative territory in the months to follow. In June 2010, the TAI stood at a seasonally adjusted 49.

"On an unadjusted basis, the TAI has been in negative territory since March. It has dropped further into negative territory after losing three points from May to June to a level of 46," said SACCI.

In June, the sales volumes index declined to 50 following May's level of 56. All the other components of trade activity except employment contracted in June.

The input price index declined further by 1 point now 11 points lower than in March 2011 while sales prices also declined by five index points to 56 from the higher 61 of March and April 2011.

In June, the index on employment conditions in the trade environment stood at 48, up from 45 in April and 47 in May. The employment prospects index registered 50 in June, moving out of negative territory from 49 in May 2011.

"While performance in the trade environment is not conducive to higher levels of employment, the current behaviour by labour in the business environment is likely to severely dampen employment prospects further," noted SACCI. Protest action over wages began last week.

Expectations in the trade environment deteriorated substantially in June but remained in positive territory. The TEI (Trade Expectations Index) registered 56 which is five points below the May 2011 level.

Expectations on all elements of the trade survey except employment deteriorated in June. The sales expectations index declined by seven points to 65, while the expected new orders index dropped by 9 points. The expected supplies index decreased to 52 and fell to its lowest level in 2011 indicating possible tight supply conditions. The index on expected inventories also marked its lowest level of 47 in June 2011 - it was at 60 in January 2011.

The expected sales and inputs price indices increased by 1 and 4 points respectively to 64 and 72 in June 2011.

"Rising costs are mainly accountable for the input price rise as fuel and other utility services costs are rising at rates 20 percentage points above consumer inflation thus putting trade margins under severe pressure. Claims for wage and salary increases are well above general inflation and are also seriously affecting the ease," noted SACCI.