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Govt blamed for tighter trade conditions - survey

Cape Town - The July Trade Activity Index (TAI) survey of the SA Chamber of Commerce & Industry (Sacci) shows a contraction further into negative space.

The index, released on Monday, shows this further contraction after trade conditions also pulled back into negative territory in June 2016.

According to Sacci, respondents cited the decline in economic activity, the predicament - especially of small and medium sized businesses - the influence of trade unions and “a non-committal approach” by government to pro-business policies as the main reasons for the further contraction.

Respondents indicated that a muted return on assets and sharp declines in profit margins were consequences of the tight trade environment.

"Trade expectations, nevertheless, remained in positive terrain, but declined both seasonally adjusted and non-seasonally adjusted," explained Sacci.

"The SA Reserve Bank’s latest prediction for zero economic growth in 2016 implies, however, that tight trade prospects will prevail for the rest of 2016."  

READ: SA business confidence lowest in more than two decades

The TAI registered 44 in July 2016, while the seasonally adjusted TAI measured 47 – down from 51 in June 2016. The seasonally adjusted TAI was 1 point lower in July 2016 than the 48 in July 2015. The Trade Expectations Index (TEI) declined to 52 in July 2016 from 54 in June, while expectations for sales volumes declined slightly.

Expected new orders were more negative as the sub-index declined by 5 points. Inventory levels remained static, but expected supply delivery declined. The new orders sub-index slowed by 5 points to 44 in July from 49 in June, while the sales volumes sub-index also fell by 5 points to 46.

The inventories index has decreased by 4 points to 45 in July and supplier deliveries deteriorated by 11 points to 36. The low backlog on orders declined by 5 index points to 33 and reflects on the ongoing uncertainty in trade conditions.

Price pressures eased further as the sub-indices of both sales prices and input price indices continued to decline in July 2016. The sales price index declined by 5 points to 54, while the input price index declined by 13 points to 56 from 69 in June.

Price rise expectations also eased further as the sales price index declined by 8 points to 60 and expectations on input prices declined as the index dropped substantially from 78 to 64.

READ: SA business confidence could be on the mend - economist

"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 (electricity), 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," explained Sacci.

"As a sector that employs semi and low-skilled workers, the decline in the employment sub-index to 47 in July 2016.  Prospects for employment over the next six months also remained constrained with the sub-index declining to 47 in July 2016 from 48 in June."

With the release of the last Sacci trade index in June its economist Richard Downing told Fin24 that trade in SA “is sort of in a holding position" because of these various restraints. He also pointed out that trade involves more than just retail.   

"One should watch the employment sub-index," Downing explained. In June it seemed to him the sub-index showed employers are not really firing nor hiring, adopting a wait and see approach.

The employment sub-index has now declined further in July and could imply more unemployment.

ALSO READ: SA trade in holding position - index

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