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SA trade in holding position - index

Jul 13 2016 18:56
Carin Smith

Cape Town - A lack of government support, political posturing for local government elections, service protests, seasonal factors and the slow pace of orders are restraining trade in South Africa at the moment.

That is reflected by respondents in the latest monthly Trade Activity Index (TAI) by the SA Chamber of Commerce & Industry (Sacci).

"Trade in SA - in other words broader than just retail - is sort of in a 'holding position' at the moment because of these various restraints respondents highlighted," Sacci economist Richard Downing told Fin24 on Wednesday.

"At the same time, from what we could see in the index, trade conditions have retained stability at around the 50 point mark - sort of between positive and negative - and if one looks at the seasonal adjustment, it is actually slightly positive." The seasonally adjusted TAI was 5 points higher in June 2016 than the 46 of June 2015.

A bit worrying to Downing is that respondents indicated that sales volumes have dropped, but this could be because of seasonal factors. At the same time respondents indicated in sub-indices that selling prices and input prices have declined, indicating less pressure on input and on the shelf. Stable interest rates and the stronger and less volatile rand - due to the Brexit impact on the pound - led to easing price expectations, according to Sacci.

READ: Business confidence stalls, eyes on policy implementation

At the same time, respondents expect rising electricity, wage and salary costs to weigh on profit margins in a tight trading environment. The latest TAI also shows that the employment situation in the trade sector deteriorated marginally. However, the prospects for employment for the next six months in the sector improved with the sub-index rising to 48 from 45 in May.

"One should watch the employment sub-index, the fairly stable conditions on the sub-index show employers are not really firing nor hiring. They seem just to be maintaining their staff. If you take into account the total job situation in SA, the trade employment position is perhaps not too bad," said Downing.

Trade expectations moved further into positive terrain and imply improved trade conditions towards year-end, the TAI shows. When looking at respondents' views on trade conditions in about six months' time, trade components like sales volumes and new orders were more positive, but inventory and supply expectations declined.

Downing pointed out that it will be the busy summer holiday period in six months' time, which is usually better for the retail sector. Employment is also more positive during this period due to the hiring of temporary staff.

The IMF’s latest predictions for lower economic growth for 2016 and 2017 for SA could, however, be an indicator of dampening trade prospects, cautioned Sacci.

ALSO READ: How Brexit could be a boost for SA trade

sacci  |  trade  |  sa economy
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