14 November 2012

South Africa: October Trade Conditions Escape Adverse Economic Conditions

Pretoria — Trade conditions in October escaped adverse economic conditions that were affected by labour action and downgrades from rating agencies, the Trade Conditions Survey found.

"Current trade conditions escaped the adverse economic conditions prevailing in September 2012 that were marred by militant labour action and downgrades from rating agencies.

"The seasonally adjusted Trade Activity Index (TAI) recovered the four points lost in September 2012 and increased to 50 in October 2012," said the South African Chamber of Commerce and Industry (Sacci) in its monthly release.

According to the survey released on Wednesday, the non-seasonally adjusted TAI moved into positive territory for the first time since May 2012. The TAI was two points above the index for October 2011.

In September, all sub-components of trade activity, excluding trade activity, turned positive, while the negative business sentiment associated with labour disruptions in September caused a shift in the pre-festive season business towards October.

A resurgence of sales and new orders ensued in October, while a build-up in inventories also occurred in advance of the holiday period.

Between September and October, sales and input prices edged up slightly. The increase in labour costs and its multiplier effects, higher utility tariffs and a weakening of the rand in October will have adverse consequences for prices in the trade environment.

"As a result, the indices for price expectations of sales rose by three index points to 65, while that of inputs increased by five points to 73 - the highest since the 79 of November 2011," said SARS.

The six-month trade expectations index (TEI) slipped to 53 in October 2012 from 55 in September 2012. In the first quarter and second quarter of 2012, the TEI averaged 65 and 61 respectively.

The uncertain circumstances in the South African economy continued to taint the outlook for trade conditions.

The trade outlook (TEI), at 53 - being just one index point above current conditions (TAI) at 52 - is a rare occurrence as the gap is usually much wider, noted Sacci.

The small margin, it said, was an indication of uncertainty and reduced optimism about the short-term.

"Employment conditions in the trade environment became tighter in October and stayed in negative territory as the employment index declined by one point to 47," said Sacci.

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