Trade conditions weaken in September

Wednesday, October 10, 2012

Pretoria - Trade conditions weakened in September, the South African Chamber of Commerce and Industry (Sacci) said on Wednesday.

Trade conditions have been tight since April 2012.

"Trade conditions appear to be settling in negative territory, i.e. below the 50 index level, as all the sub-components of trade activity were less than 50 in September," said Sacci.

The seasonally adjusted Trade Activity Index (TAI) weakened by four points to 46 after recovering by five points to 50 in August. The non-seasonally adjusted TAI also remained in negative territory at 47 in September declining from 49 in August.

Sacci said that sales and new orders were in negative territory for the last three months and registered 47 and 46 respectively in September while the inventories and the supplier deliveries indices remained almost unchanged at 47 and 49.

Between August and September sales and input prices continued to be stable.

"Cost pressures from administered price increases are substantially greater than that of the producer inflation and weaker trade conditions make it difficult to absorb rising costs. The increase in certain labour costs (above 12% year-on-year) and the weakening of the rand (some 18% in the last 30 days), if sustained, could have adverse consequences for inflation and trade conditions in South Africa," noted Sacci.

The six month trade expectations index (TEI) entertained a level of around 55 for the last three months after measuring more than 60 up to June 2012.

The uncertain conditions in the South African economy since the middle of August 2012 will affect the outlook for trade conditions in the next six months with the TEI possibly ending the year in negative territory, said Sacci.

"The six month outlook for the key components of trade activity confirms the tentative nature of current trade conditions. The sales and new order expectations indices remained at about the same levels in September 2012 compared to August 2012. The strike in the transport industry contributed to higher inventory holdings of 45 compared to 41 in August 2012. Supplier deliveries are not expected to be negatively affected at this stage as the index remained at 51."

Employment conditions in the trade environment were unchanged and in negative territory as the employment index stood at 48. "Employment prospects did not change materially despite higher labour costs and the index registered 49 in September 2012."