A sustainable recovery in trade conditions continued to elude the trade survey. The exceptional improvement in November 2012 was followed by a more than proportionate decline in December 2012.
The slowdown by 15 index points to 42 in December 2012 followed on the increase of 5 points in November 2012. The seasonally adjusted Trade Activity Index (TAI) decreased to 44 in December 2012 from 53 in November 2012. The seasonally adjusted TAI was 3 index points higher than in December 2011. The anticipated improvement in the TAI on the back of probable stronger retail activity over the Christmas season did not materialise.
All the sub-components of trade activity performed negatively between November and December 2012. The substantial decline in sales and new orders in December 2012 set trade activity levels back by about six months. All corresponding trade processes like supplier deliveries and inventories trailed the negative outcome.
Selling and input prices did not deviate much from the average index levels of the past six months and December 2012 was no exception. The greater than inflation increases in labour costs, higher utility tariffs and the volatility of the rand affected input prices and threatened trade margins, as tight trade conditions kept selling prices from accommodating costs. The negative impact on expected prices of sales and inputs is more notable in the price indices for the next six months. Sales prices are expected to increase by a further 3 index points to 72 (16 points up from July 2012) and input prices are expected to increase by 5 points to 80 (17 points up from July 2012).
The six month forward trade expectations index (TEI) recovered the lost ground of November 2012 and increased from 51 to 60 In December 2012. The TEI is again closing the year on an optimistic note and is slightly higher than the 59 of a year ago. The TEI average of 59 for 2012 was the same as in 2011. The TEI averaged 55 in the second half of 2012 compared to 63 in the first half of 2012. The increasingly uncertainty in the South African and international economy in the second half of 2012, local labour militancy, growing domestic input price pressures and the volatile rand, lowered the outlook for trade conditions in the first few months of 2013.
Employment in the trade environment slipped in December and moved into negative territory despite temporary seasonal employment opportunities in retail trade. The employment index declined by 2 points to 49. Employment prospects for the next six months may improve as the employment outlook index increased from 47 to 53 in December 2012.