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Trade Conditions Slip Back
Trade Conditions Slip Back
According to the SACCI Trade Conditions Survey for December 2011, the trade environment suffered a setback against the gains made in October and November. The seasonally adjusted trade activity index (TAI) that measures current trade conditions, slipped by 7 points to 42 in December 2011. The non-seasonally adjusted TAI was 39 in December 2011 compared to 53 in November 2011. The TAI usually reflects lower volumes of business-to-business activity in December, but the current level of 39 is exceptionally low.
Sales volumes, new orders as well as inventories declined substantially during December 2011 while the lower trade activity also resulted in fewer supply deliveries. The seasonally high number of 60 for the sales volume index in November 2011 decreased significantly by 20 points in December 2011. The employment index was the only component of the trade activity index that remained unchanged at 46 in December 2011.
In December, the TEI exceeded its average of 55 for the second half of 2011, achieving a strong 59. At 58, the average TEI for 2011 was 4 points below its average of 62 in 2010. At the height of positive trade expectations, the TEI measured 67 in 2006. The December 2011 outlook for all components of trade, over the next six months, is significantly better than the average for these components in the latter half of 2011.
The current sales price index was 6 points higher on average in 2011 than in 2010 while the average input price index increased by 7 index points from 2010 to 66 in 2011. The breaching of the upper range of the inflation target towards the end of 2011 and the much higher producer price inflation are evidence of the stronger inflationary pressures as reflected by the Trade Conditions Survey.
The six month outlook for sales and input prices continued to remain high as the respective indices measured 70 and 75 respectively in December 2011. With inflationary expectations remaining high due to increased input costs, businesses’ profit margins will continue to be squeezed in 2012. Nominal interest rates are likely to remain unchanged in the first half of 2012 thereby supporting improved trade conditions.
Released by the South African Chamber of Commerce and Industry at the SACCI offices in Rosebank, Johannesburg.
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