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SA Recovering Slowly From Distorted Lockdown Trade Conditions

20 August 2020 – T he continuing lockdown has deepened the recessionary economic conditions and further distorted trade conditions, says the South African Chamber of Commerce and Industry (Sacci).

It adds that the selected restrictive approach towards certain types of trade, especially during the hard lockdown period in late March and throughout April, had a serious effect on trade.

The seasonally adjusted Trade Activity Index (TAI) accordingly declined by 11 index points to 26 in April, but has since gradually increased to 37 in July.

Expected trade conditions consequently also deteriorated strongly in April with 70% of respondents having cited a negative outlook. Respondents remained sceptical in July, with 62% maintaining a negative view about trade conditions for the rest of this year.

Compared with last year July, the TAI was three index points lower while the six month Trade Expectations Index (TEI) was four points lower than a year ago.

Sales volumes and new orders improved from highly depressed levels in April, but remained around pre-lockdown recessionary levels.

“The interference in consumer choice for certain goods and services not only distorted prices, but also had multiplying effects beyond the trade environment of such goods and services. Employment in the affected sectors hence declined. Supplier deliveries and inventories were still below pre-lockdown levels in July,” says Sacci.

Trade expectations for the next six months recovered somewhat but imply a slow recovery over the next six months if the lockdown level is lowered, it adds.

The organisation expects that both sales and new orders will recover but remain sluggish towards year-end with the indices well below 50.

Supplier deliveries and inventories are seen to muddle through over the next six months.

Both sales and input prices are expected to face upward pressure over the next six months as inflationary consequences emerge.

Meanwhile, after the employment subindex slipped to 27 in May and June, it improved slightly to 33 in July.

Expectations for jobs in the trade sector towards year-end have improved with 34% of respondents hiring staff in July compared with 25% in June.

Jobs in the trade sector, however, remain at risk over the next six months, Sacci says. Source (Engineeringnews)