Trade expectations deteriorate as economic worries sink in - index

Cape Town - Those involved in trade in South Africa worry about recessionary conditions, unstable and unpredictable economic policy, large shifts in currency value, political instability, lack of leadership and low levels of business and consumer confidence.

High unemployment and crime levels are further worrying factors, according to the latest Trade Activity Index (TAI) of the SA Chamber of Commerce and Industry (Sacci).

Respondents indicated that all these factors make business management exceedingly difficult.

Although the employment sub-index remained reasonably stable on 49 in May 2017, the employment outlook in the trade environment for the next six months weakened further and could add to unemployment as the employment expectations index declined by two index points to 41 in May 2017, according to Sacci.

Trade expectations in SA have deteriorated from an improved level earlier this year, the latest seasonally adjusted Trade Expectations Index (TEI) of the SA Chamber of Commerce and Industry (Sacci) shows.

In February 2017 the TEI was at a positive 63, but trade expectations have now deteriorated to such a degree that the TEI stood at 48 in May. In April it was at 49.

Sacci's latest Trade Activity Index (TAI) also remained in negative territory, recording 49 in May 2017 compared to 45 in April 2017. The seasonally adjusted TAI improved by two index points between April and May 2017 to 47 in May. Since May 2016 the seasonally adjusted TAI declined by two index points.

Sacci economist Richard Downing told Fin24 on Wednesday that the trade surveys look at a much broader environment. He especially regards especially the trade expectations index as of critical importance to watch.

"Businesses are battling, but this is not the time to increase prices. At the same time there are pressure on prices as one cannot control costs from the input side," said Downing. At the same time, he pointed out that the latest retail sales show an improvement. Yet, that is difficult to reconcile with what one hears about the economy.

"All indications confirm that the SA economy is in trouble. There is uncertainty about policy, where we are going and things like property rights. What is worrying is that ratings agencies are now moving into the private sector as well," said Downing.

"By downgrading on a broad front, ratings agencies are now telling as broad based reform has to take place. Consumers kept refinancing, but that is not sustainable over the long term. Everybody is going to feel the pain and probably mostly so the poor."

READ: Trade expectations weaken notably - chamber

Sales volumes

The TAI and TEI shows that recent sales volumes that were notably hard hit in April 2017, recovered as the sales volumes index improved from 44 in April 2017 to 52 in May 2017. The new orders index also improved and was nine points higher from the exceptionally low 40 in April 2017.

The expectations sales volumes index remained subdued in May 2017 at 54 after reaching a high of 73 in February 2017. The expectations for new orders index also declined from 50 to 49 in May 2017.

The inventory index dropped to 42 from 47 in April 2017 due to lower sales expectations. The selling price index and the input price index remained virtually unchanged for sales prices at 61 in May from 62 in April, and 63 in May 2017 from 62 in April for inputs costs.

Although still high, the price indices endorse lower consumer and producer inflation at present, said Downing.

Inflationary expectations indices remained high. The sales price expectations index stuck to 68 in May 2017, but expected input prices especially eased as the index declined from 76 in April 2017 to 66 in May 2017.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.