Trade conditions improve slightly

Trade conditions move slightly into positive territory in June, after bordering on the edge in May.

Johannesburg - Trade conditions move slightly into positive territory in June, after bordering on the edge in May.

This is according to the South African Chamber of Commerce and Industry, which released its monthly Trade Activity Index (TAI) on Wednesday.

The TAI registered 49 in June 2015, but the seasonally adjusted TAI measured 51 – improving from 50 in May 2016. The seasonally adjusted TAI was 5 points higher in June 2016 than the 46 of June 2015.

Respondents cited the lack of government support, the political posturing for local government elections, service protests, seasonal factors and slow pace of orders to materialise, as restraints to trade, it explains.

The new orders sub-index slowed slightly from 50 in May to 49 in June while the sales volumes sub-index slipped from 59 to 51. The inventories index increased by 2 points to 49 in June but supply deliveries dropped from 50 to 47. The low backlog on orders remained unchanged at 38.

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SACCI notes prices eased up notably as the sub-indices of both sales prices and input price indices declined further in June 2016. The sales price index declined by 6 points to 59 while the input price index declined by 11 points to 69 from 80 in May. Price expectations also slowed with the sales price index declining by 1 point to 68 and expectations on input prices remained unchanged on 78.

Stable interest rates and the stronger and less volatile rand (given the pressure on the British pound owing to Brexit) led to easing price expectations. However, it says, rising energy (electricity), and wage and salary costs are expected to weigh on profit margins in a tight trading environment.

Trade expectations moved further into positive terrain and imply improved trade conditions towards year-end. The seasonally adjusted Trade Expectations Index (TEI) improved to 56 in June 2016 from 55 in May. Trade components like sales volumes and new orders were more positive, but inventory and supply expectations declined. The IMF’s latest predictions for lower economic growth for 2016 and 2017 for South Africa could be an indicator of dampening trade prospects.

The employment situation in the trade sector deteriorated marginally as the index declined by another point in June 2016 to 48, 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.

IOL