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Improved trade activity in Feb, but sustainability questioned

Improved trade activity in Feb, but sustainability questioned

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13th March 2014

By: Creamer Media Reporter

  

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Trade activity improved in February and was at stronger levels than in January 2014 and February 2013, the South African Chamber of Commerce and Industry (Sacci) said in its Trade Conditions Survey on Thursday.

After dipping into negative territory in December (44) and in January (46), the trade activity index (TAI) increased to 54 in February. The seasonally adjusted TAI improved by 4 index points to 51 in February and the index was also better than the 48 recorded in February 2013.

“Despite the tight financial position of households in dealing with higher inflation and increased financing costs, and businesses experiencing substantially higher input costs, faster credit growth helped to improve sales volumes and new orders. Easier credit availability, however, raises the question of the sustainability of improved trade activity,” explained Sacci.

The sales volumes index increased from 44 in January to 55 in February, while the new orders index picked up from 47 to 57. “More new orders confirm the relatively positive outlook for sales volumes over the next six months,” the chamber pointed out.

Inventories continued to expand, with 55% of businesses surveyed expecting to increase stock levels. Supplies were well provided and were expected to improve further over the next six months, while the sales and input price indices remained high in February on 66 and 80, respectively.

Sacci noted that the 80 for the input price index was an indication of the highest price pressures experienced since the recession of 2008 and 2009.

The chamber said the slightly improved rand exchange rate in February may help to smooth extensive input cost stress and price escalations, adding that price expectations (sales and input) remained high but had appeared to have peaked. “The level of input costs has nevertheless reached levels that narrow already tight profit margins considerably,” said Sacci.

Meanwhile, the seasonally adjusted trade expectations index (TEI) remained on 58 in February – down from the 61 in December 2013. Expectations for the components of trade activity did not change materially between January and February; however, overall trade expectations had been tapering off since August 2013, with the TEI gradually declining from 64 in July 2013 to 58 in February.

Current employment conditions improved with the index increasing from a low 45 in January to 50 in February, while the employment prospects index remained unchanged at 52 in February.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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