Trade Activity index falls sharply
Few trading days in February had an impact
THE TRADE Activity index (TAI) receded in February to 48 points from 62 in January, the SA Chamber of Commerce and Industry (Sacci) said yesterday.
“After the surprise in the Trade Activity index in January 2015, it pulled back into negative territory in February,” Sacci said.
“The random surprise move in January 2015 was thus corrected in February as the TAI again measured 48. The seasonally adjusted Trade Activity index likewise receded to 48 in February 2015.”
Sacci said that the fact that there were fewer trading days in February had an impact, the non-seasonally adjusted TAI was also six points lower than in February 2014.
But chief economist at the SA Institute for Race Relations Ian Cruickshanks said that the improvements were a knee-jerk reaction to the lower numbers last month and the overall level of confidence remained negative.
Cruickshanks said that was why consumer spending and the consumer sector were still under pressure and likely to remain there. He said investors were concerned that there were no new investments, no new jobs and little likelihood of increase in the overall level of activity.
“I think really that the overall reaction is disappointing.”
Sacci said in October and November that the TAI improved but retreated to 48 in December.
“The correction in the trade conditions index is more in line with the slow economic growth expected for 2015,” Sacci said.
“Any excess domestic demand will most probably find its way towards imports and cause an even larger deficit on the current account of the balance of payments.”
Import volumes were trending higher in the fourth quarter of 2014. Sacci said that the constraints in the electricity supply had a “more serious effect on trade than first anticipated, especially small- and mediumsize businesses”.
Of the possibility of a continued decline in the index, Cruickshanks said it would be presumptuous to judge it in advance but that he would not be surprised if it did not pick up.
“I would say looking at the overall levels of business and consumer confidence, I think we may see a general weakening in that confidence,” he said.
He said the index made business people exercise more caution in investing in the growth of their businesses.
“What he (the businessman) is going to do is he is going to put off any purchases, new developments or new investments in his own company and rather cut costs than expand,” he said.
The rand yesterday hardly registered the trade index performance as it did last month with a sustained decline against the dollar after the index fell more than was expected.
Cruickshanks said as far as the rand was concerned it was moving together with other emerging market currencies and was one of the worst performers.
He said the emerging market group was under a lot of pressure with problems similar to South Africa’s such as the the twin deficit primarily and low commodity prices.
“There is little sign of that changing, that is the primary concern it is the basic broad fundamentals rather than just a knee-jerk reaction to the confidence. It does look as though there is a reversal in foreign portfolio growth and that foreigners are beginning to be concerned (whether) the pressure on the rand is going to stay,” Cruickshanks said.
Sacci said in October and November that the TAI improved but retreated to 48 in December.