Trade expectations downbeat

2012-09-13 00:00

DESPITE increasing by five points to a level of 50 on a seasonally adjusted basis in August, the key Trade Activity Index (TAI) of the South African Chamber of Commerce and Industry’s (SACCI) has failed to inspire confidence in the wellbeing of the wholesale and retail environment.

SACCI economist Richard Downing told The Witness yesterday that a lacklustre Trade Expectations Index (TEI), which is a forward-looking expectation of the environment six months ahead, was of even more concern.

The latest TEI was stagnant month on month at 54 points. The TEI was 67 points in March and has seen a steady, substantial decline in recent months.

Downing warned that the constant deterioration in the TEI did not bode well for retailers, wholesalers, and business-to-business and international trade activity.

“There is clearly a scaling down of expectations in the trade environment.”

While the employment sub-index remained largely stable, Downing said, “there is no real enthusiasm from the business sector to employ more people”.

The new orders sub-index on the TEI dropped from 73 in March to 56 points in August, while sales volumes declined from 75 in March to 64 last month.

Downing warned that although selling prices on the TEI had risen from 56 to 59 points month on month, input prices had risen from 63 to 65 points month-on-month in August. He said it was increasingly clear that businesses could only pass on cost increases to the consumer to a limited extent and that businesses were therefore being squeezed by higher input costs.

Downing warned that the relentless rise in administered prices represented a major risk for businesses, as this trend was out of the control of business owners.

Administered prices are those for goods and services provided by entities owned by the government, such as electricity tariffs.

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