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SACCI says businesses operated in tighter trade conditions in February

Mar 14, 2018
SACCI says businesses operated in tighter trade conditions in February

Although the business climate remained on a relative improved level in February 2018 compared to January 2018 and February 2017, trade conditions slackened in February 2018 compared to December 2017 and January 2018, the South African Chamber of Commerce and Industry (SACCI) said on Wednesday

"The seasonally adjusted Trade Activity Index (TAI) of SACCI’s Trade Conditions Survey for February 2018 measured 42 after the 51 in January 2018 and 48 in December 2017," explained Alan Mukoki, SACCI CEO.

"The seasonally adjusted six month Trade Expectations Index (TAI) was slightly down in February 2018 to 56 after a reading of 60 in December 2017 and 58 in January 2018. 

"All elements of trade, excluding backlog on orders, improved on the January 2018 albeit marginally. Both the TAI and the TEI for February 2018 were about 4 index points below the levels of February 2017."

Mukoki said that the tighter trade conditions in February 2018 were additionally exacerbated by the lack of growth, profit margins that are under pressure, limited cash-flow and a stronger rand that effects rand income from exports.

"However, according to respondents, a positive vibe still prevails. The increased VAT rate, the higher fuel levy and high custom duties announced in Budget 2018/19, are weighing negatively on trade expectations.   

"Sales volumes were unchanged in February 2018 with the sub-index on 43 (in negative territory) and the new orders index marginally up from 40 to 41," he described.

"Expected sales volumes and expected new orders were slightly lower at 64 and 63 respectively in January 2017, with six month inventories levels up by 3 index points to 52."

Mukoki said that the sales price index measured 48 and the input price index 61.

"This is the first time since April 2009 (after the global recession of 2008/09) that according to respondents, sales prices were declining – i.e. below the 50 index mark," he described.

"Price expectations also declined but remained at high levels of 65 and 72 for sales prices and input prices respectively.  The difference between lower sales and higher input price expectations confirms the pressure on profit margins in the trade environment.

"The employment sub-index remained on 46 in February 2018 while the employment outlook index for the next 6 months remained positive at 53 in February 2018 but declined by 3 index points."