Trade conditions tightened in August as businesses reported a slump in sales volumes and new orders, driving a downward revision in the six-month trade outlook of business owners, the South African Chamber of Commerce and Industry (Sacci) said on Wednesday.

The organisation reported in its Trade Conditions Survey for August that the trade activity index (TAI), which measured the view of business on current trade activity, gradually deteriorated from 61 in April to 52 in August.

This was despite trade expectations holding up reasonably well over the same period, with the trade expectations index (TEI) contracting by a smaller margin from 64 to 61.

The seasonally adjusted TAI decreased by three points from 56 in July to 53 in August, as the sales volumes and new orders indices declined by a substantial nine and 12 points respectively.

Similarly, supplier deliveries declined by five points to 48 in August, wth Sacci noting concerns of increasing pressures on this index owing to the impact of prolonged strikes in several local industries.

Meanwhile, substantially lower sales volumes drove inventory increases, while backlogs on orders also eased.

Pricing in August laboured under rising input costs, with 65% of respondents indicating lower sales prices in August, compared with 66% in June.

A notably high 77% of the respondents experienced rising input costs in August, which was similar to that reported in July, but this was considerably higher than the 69% reported in August 2011 and the 66% in August 2012.

Further contributors to the cost-push inflation in August were year-on-year increases in fuel prices (15%), administered prices (11%) and the prices of imported goods (8.9%).

“In addition, excessive wage demands in the current context will aggravate the inflationary process and lead to even tighter trade conditions, as well as have adverse implications for employment creation,” Sacci commented.

Despite this, employment conditions in the trade sector remained stable, with the employment index at 51 in August, while the employment prospects index declined from 52 in July to 51 in August, suggesting a stagnant but stable employment situation in the trade sector in the short term.

Looking ahead, despite dipping slightly from the July reading, at 61, the TEI remained in positive territory in August, while the outlook for sales volumes, new orders, inventories and supplies declined by between one and two index points each.

The expected pressure on input and sales prices would remain high, as 77% of respondents expected input prices to increase over the next six months and 69% expected sales prices to increase over the same period.