Trade conditions weakened in June and would continue to be under pressure over the next couple of months, weighed down by tight economic conditions and low business confidence, the South African Chamber of Commerce and Industry (Sacci) said on Tuesday.
The chamber said a weaker performance in retail trade, after robust increases earlier this year, had resulted in volatiliy in the seasonally adjusted Trade Activity Index (TAI), which lost seven points to measure 49 in June – down from 56 in May.
The nonseasonally adjusted TAI dipped to 48 in June, compared with 55 in May, but climbed by two from the comparative period last year.
“Volatility also marks the performance of sales and new orders which, after recovering strongly to 64 and 58 respectively in May, declined to 51 for both indices in June. A year ago the sales volume index was at 50 and the new orders index measured 43. The inventories index decreased to 50 from 51 in May, while supplier deliveries declined to 44 from 53,” Sacci said in a statement.
The indices for sales and input prices decreased further from 59 and 68 in May to 55 and 63, respectively, in June.
Price pressures moderated as weaker trade conditions made it more difficult to pass on rising costs. Administered prices, nevertheless, rose by an average of more than 11%.
“The combination of weaker trade conditions and increasing cost absorption by businesses is placing profitability under pressure,” Sacci stated.
Meanwhile, Sacci stated that the Trade Expectations Index (TEI) for the next six months would improve as it factors in the year end season. The TEI increased to 61 from 57 in May, 5 points higher than the 56 in June 2011.
The six-month outlook for key components of trade activity also lifted in June while expectations for sales and input prices eased further by one and two points to 60 and 66 from 61 and 68, respectively, in May 2012.
The volatile conditions also influenced expected inventory holdings as stock levels picked up in June after declining in May and April 2012. Expected supplier deliveries remained well in positive territory with the index at 58.
Employment conditions in the trade environment improved during June 2012 as the index moved from 41 to 44 in negative territory. The outlook for employment index moved from 49 to 50. The likelihood of improved levels of employment remains low.