The South African Chamber of Commerce and Industry’s (Sacci’s) monthly Trade Activity Index (TAI), which dipped into negative territory at 49 in June, declined further to 44 in July, revealing “tight and subdued” conditions in South Africa.

The seasonally adjusted TAI tracked downwards into a negative reading from 51 in June to 47 in July.

The tight trade environment resulted in a muted return on assets and sharp declines in profit margins, Sacci noted on Monday, pointing out the respondents’ view of a decline in economic activity, the influence of trade unions, a noncommittal approach by government to pro-business policies and the “predicament” small businesses find themselves in, which led to the contraction in trade conditions.

“The new orders subindex slowed by five points to 44 in July from 49 in June, while the sales volumes subindex also fell by five points to 46. The inventories index decreased by four points to 45 in July and supplier deliveries deteriorated by 11 points to 36.

“The low backlog on orders declined by five index points to 33 and reflects on the ongoing uncertainty in trade conditions,” Sacci said, unpacking the the results of the monthly trade conditions survey.

The subindices of both sales price and input price continued to decline, by five points and 13 points to 54 and 56 respectively in July.

“Stable interest rates, the stronger and less volatile rand and a decline in the fuel price gave scope for lower inflationary expectations. However, rising energy costs and higher wage and salary demands can be expected to put pressure on profit margins, lead to strain on job creation and further constrain an already struggling trade sector,” Sacci explained.

While trade expectations remained in “positive terrain”, the seasonally adjusted and nonseasonally adjusted Trade Expectations Index (TEI) registered declines to 53 and 52 respectively in July.

The sales volumes expectations slid one point to 58 in July, while expected new orders fell five points to 53.

TEI inventory levels remained at 50, while the expected supply delivery declined four points to 47 in July.

“The South African Reserve Bank’s latest prediction for zero economic growth in 2016 implies that tight trade prospects will prevail for the rest of 2016,” Sacci noted.

Further, the sales price index declined by eight points to 60 and expectations on input prices declined as the index dropped substantially from 78 to 64.

“As a sector that employs semi- and low-skilled workers, the decline in the employment subindex to 47 in July could imply more unemployment. Prospects for employment over the next six months also remains constrained with the subindex declining to 47 in July from 48 in June,” Sacci concluded.