Trade activity was in negative territory during July with pressure on the trade sector having been broad based as a result of uncertain economic prospects, the South African Chamber of Commerce and Industry (Sacci) said on Thursday.
Sacci’s seasonally adjusted composite Trade Activity Index (TAI) declined by four index points to 48 in July, down from 52 in June, with all trade activity subindices in negative territory.
Notably, the July TAI was ten index points below that of July 2013.
Sacci pointed out that the sales volumes subindex was eight points lower than in July last year, while the new orders subindex was 15 points lower, which indicated that a challenging period lay ahead.
“Even supplier deliveries, which was above 50 points for the last five months, plunged to 39 in July, [while] the inventories index in July declined by five index points to 48,” the chamber said.
Meanwhile, softer trade conditions took some pressure off prices as the selling price subindex decreased by six index points to 58, while the input price index remained at 70 – much higher than the selling price index.
Sacci noted that this divergence in prices would further squeeze profit margins, adding that real financing costs had increased as interest rates rose by 0.25 percentage points, thereby placing more pressure on debt-burdened consumers and increasing financing costs for businesses.
Further, the chamber highlighted that price expectations had softened during July with the selling and input price expectations subindices retracting.
“In contrast to the TAI, the seasonally adjusted trade expectations index increased by five points to 60 from 55 in June 2014. Expectations for the sales volume component of trade activity also forged ahead by five index points to 61 in July 2014,” Sacci said.
Further, in July the employment conditions index in the trade environment contracted to 46 from 48 in June. The prospects for employment in the trade sector, however, improved to 51 following the increase by one index point in June, the chamber concluded.