The seasonally adjusted composite Trade Activity Index (TAI) declined by four index points to 48 in July 2014 from 52 in June 2014, according to the latest SACCI (South African Chamber of Commerce & Indsutry) Trade Index.
The trade conditions index was stable and has been close to the 50 mark since February 2014. July was the first month in 2014 in which trade conditions dipped well below 50. With uncertain economic prospects, pressure on the trade sector is broad based and all trade activity sub-indices were in negative territory in July 2014. The July 2014 TAI is 10 index points below the July 2013 TAI.
The sales volumes sub-index was 8 points lower than in July 2013 while the new orders sub-index is 15 points lower than in July 2013 and indicative of a challenging period ahead. Even supplier deliveries, which was above 50 points for the last five months, plunged to 39 in June 2014. The inventories index in July declined by five index points to 48.
The softer trade conditions took some pressure off prices as the selling price sub-index decreased by 6 index points to 58 while the input price index remained on 70 – much higher than the selling price index.
This divergence in prices will further squeeze profit margins. Real financing costs increased as interest rates rose by 0.25 percentage points thereby placing more pressure on debt burdened consumers and increasing financing costs for businesses.
Price expectations softened with both the selling and input price expectations indices retracting in July. In contrast to the TAI, the seasonally adjusted trade expectations index (TEI) increased by 5 points to 60 from 55 in June 2014. Expectations for the sales volume component of trade activity also forged ahead by 5 index points to 61 in July 2014.
In July 2014 the employment conditions index in the trade environment contracted to 46 from 48 in June 2014. The prospects for employment in the trade sector, however, improved to 51 following the earlier increase by 1 index point in June 2014.
