Trade Conditions Remain Depressed

SACCI today released the results of the SACCI Trade Conditions Survey for May 2008.

The Trade Activity Index (TAI) which measures the latest monthly trade conditions, (after recovering to 50 in February 2008) dropped to 45 in April 2008 and declined further to 43 in May 2008. May’s level is marginally lower than the 44 for the TAI in December 2007 and continues to imply depressed trade conditions.

The sub-index on current sales volumes which, after a level of 55 in February 2008 declined substantially to 44 in March 2008, recovered slightly to 46 in April 2008 and again fell back to 44 in May 2008. The new orders sub-index dipped to 40 in May 2008 from 42 in April 2008.

After the six month forward - looking Trade Expectations Index (TEI) recovered to 58 in February 2008, it declined to 52 in March 2008, and to 46 in May 2008. This is the lowest level for the TEI since the inception of the survey in August 2001. The low TEI is a continuation of a downward trend that started in February 2007 and declined from a high of 70 in January 2007 to the current 46 – a markedly depressed outlook for the next six months. The prospects for an improvement in trade conditions appear uncertain and tighter financial conditions and cost pressures could further worsen trade prospects without a turning point in sight over the shorter term.

The sub-index on sales expectations improved marginally to 52 in May 2008, after declining to 51 in April 2008. The 51 in April for the sales expectations index was the worse level since the survey started in August 2001. The index on expected new orders declined by a single point in May 2008 after this sub-index lost 5 points in April 2008 following a notable decline of 8 points in March 2008.

Inflationary pressures remain high although there appears to be some easing. The index on selling prices declined to 72 in May 2008 – still 12 points above the December 2007 index level. The input price index is still 15 points higher than the 67 in December 2007 after increasing to 84 in March 2008 and dipping slightly to 82 in May 2008. Fast rising prices remain a strong possibility over the next six months (survey period) as global fuel and food prices continue to witness record levels and the weaker rand adds to the price pressures.

The employment index declined to 46 in May 2008 after it stayed at 47 in April 2008 while employment prospects in the trade environment dug deeper into negative territory in May 2008 as the sub-index declined further from 47 to 46.