Trade Conditions Remain Tight

14 February 2020 – Trade conditions remained tight in January, with 57% of the respondents to the South African Chamber of Commerce and Industry’s (Sacci’s) Trade Conditions Survey having experienced negative conditions.

Fifty-four percent of the respondents also expect conditions to remain depressed in the next six months.

The seasonally adjusted Trade Activity Index (TAI) was at 43 index points in January, one index point lower than in December, while the Trade Expectations Index (TEI) remained at 46, as was the case in the previous two months.

The average for the TAI for 2019 was 39, which implies that 61% of the respondents experienced tough trade conditions throughout the year. 

The different elements of trade were mixed in January, with sales and new orders well into negative territory, below the 50 index point mark, at 40 and 41 index points, respectively. The tight trade conditions continued to suppress sales prices with half the respondents reporting unchanged selling prices reflecting rigid and low demand.

Contrary to sticky sales prices, Sacci said 65% of the respondents continued to experience rising input costs, which put profits and the viability of businesses under pressure. 

External conditions that continued to affect the trade environment included a lack of general business confidence; decreased real disposable household income; a cost of living that exceeds general inflation; job losses; a weakening rand; and a real increase in administered prices.

Additionally, Sacci said the lack of effective service delivery “does not justify the tax and tariff burden of some municipalities”, and the erratic energy supply owing to load-shedding and cable theft hampered trade with the costs of fuel and alternative energy supplies, which created havoc with input costs.

Although the decrease in the repo rate by the South African Reserve Bank in January was a positive move which improved trading conditions, albeit at a depressed level, tight trade conditions remained.

Employment opportunities remained scarce with the subindex virtually unchanged at 44 index points compared with 45 in December, while employment prospects for the next six months remained subdued, with the subindex on employment expectations remaining at 38 index points. Source (Engineering News)