Trade conditions remain subdued: SACCI

According  the South African Chamber of Commerce and Industry’s (SACCI’s) latest survey, trade conditions among businesses remained weak in May 2018. The Trade Activity Index (TAI), indicating prevailing trade conditions, was 40 this month.

This is compared with recording 39 in April 2018. This is well into negative territory and below the 50-index point benchmark of no change. The survey also shows trade expectations for the next six months, as the Trade Expectations Index (TEI) declined from 54 in April, to 51 in May. The current weak trade conditions are marked by decreased sales volumes, fewer new orders and declining supplier deliveries. The May 2018 trade conditions were more restrained than in May 2017 with the TAI 9 index points lower. Trade expectations, however, are better than a year ago, and 3-index points above the May 2017 level of 48.

Some respondents raised concerns about potentially impeding effects on trade – uncertainty on the Mining Charter; declining export orders; a stronger rand affecting rand earnings from exports; new contract prices under pressure; higher fuel costs; and service protests’ impacts on trade and trading hours.

According to the survey, sales volumes remained under pressure in May 2018 with the sub-index only 1-index point up from 35 in April 2018, to 36. New orders were marginally better with the sub-index up 1 point to 35. Expected sales volumes and expected new orders were both lower as the sales expectations sub-index declined to 57, from 61 in April. The new orders index slipped from last month’s 54 to 52. Subdued trade activity led to less inventory holdings with the sub-index declining from 50 to 45 in May.

The sales price index eased further by 3-index points to 58 while the input price index decreased by 7-index points to 65. Tight trade conditions have put additional stress on prices – bringing the viability of many businesses under review. Price expectations suggest lower sales prices, even with input prices increasing – suggesting a further squeeze on profits and more challenges to remain in business.

The employment sub-index improved by 1 point to 44 in May 2018, while the 6-month employment outlook index declined by 7-index points to 45. This means there are likely to be fewer prospects for employment creation in the trade environment.