SA trade conditions still firmly rooted in negative territory

The latest survey by the SA Chamber of Commerce and Industry (Sacci) shows trade conditions remained firmly rooted in negative territory in February, near levels last seen in 2020 when SA was under the Covid-19 state of disaster.

Sacci’s trade activity index released on Wednesday improved slightly to 31 points from 28 points in January, which was the worst level since the 25 points recorded for April 2020, as the local economy barely remains afloat.

The composite index of sales volumes, new orders, supplier deliveries, inventory levels and employment is based on a scale of 0 to 100, with a reading of less than 50 indicating negative conditions. A reading above 50 denotes positive environment.

Sacci CEO Alan Mukoki said though there was minor improvement between January and February, 69% of respondents in general still experienced February trade conditions as negative.

“Seventy-nine percent of the participants viewed the February 2024 trade conditions as worse than a year ago,” Mukoki said.

“Six-month expectations lifted somewhat but only 43% had positive expectations about future conditions.”

Despite the low reading, the index shows all elements of trade improved in February.

Sacci economist Richard Downing said just 26% of respondents experienced higher sale volumes in January, which improved 34% in February.

New orders also showed a slight improvement in February, he said. Downing said input cost slowed further with just 56% of respondents recording rising input costs in February. That led to a significant easing in sales price rises as only 38% of respondents recorded sales price increases, he said.

“This also implies a notable drop in inflationary expectations as both input costs and sales prices might decline further over the next six months. The Reserve Bank may possibly consider easing its monetary stance on interest rates,” Downing said.

A closer look at the data shows the real output of the wholesale and retail trade, and hotels and restaurant sector fell 1.7% year on year in 2023 after growing 3.5% in 2022.

“A number of trade activities are touched by the cumbersome trade conditions [including] the logistical problems at harbours and rail transport that have limited merchandise global trade especially low-value-high-volume exports and which contributed to the more difficult trade conditions,” Downing said.

He said tourist services are still in the recovery phase while new-vehicle sales, though lower, appear to have stabilised.

Mukoki said that with households struggling to make ends meet, retail trade volumes were lower in December 2023 but benefited from Black Friday in the preceding month.

“Lower interest rates could help to stabilise retail trade activity and enhance household spending,” Mukoki said.

“Electricity supply, however, continues to affect trade conditions — notably the additional cost to provide other sources of energy and stock losses of perishable goods.”

Still, while trade conditions remain in contractionary territory, they seem to have had relatively less effect on employment. “In January 2024, 34% of respondents were still hiring staff — which increased to 38% in February 2024. The prospects for additional employment in the trade sector in the next six months remain limited,” Downing said.