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Trade conditions have been tighter since April 2012 and continues to provide lacklustre performance. Although the seasonally adjusted Trade Activity Index (TAI) recovered by 5 points to 50 in August 2012, it remains below levels achieved earlier in the year. A year ago the seasonally adjusted TAI stood at 48. The non-seasonally adjusted TAI remained in negative territory in August at 49 – up from 45 in July 2012.

Trade conditions continue to be volatile but the activities surveyed are converging around the 50 index level as is notably the case with sales and new orders. After reaching levels of around 60 in May 2012, the sales and new orders indices both registered 49 in August 2012. The inventories index increased from 45 to 48 in August 2012 with supplier deliveries improving from 42 in July to 50 in August 2012.

Sales and input prices were stable as the sales price index rose by one point to 58 and the input price index declined marginally to 65 from 66 in July 2012. Although price pressures at present remain at bay, cost increases of especially administered prices are more than double that of the producer inflation rate. The weaker trade conditions make it difficult to cope with these rising costs. The latest year-on-year rise in the pump price of diesel was 17.6%.

The six month trade expectations index (TEI) are down by about ten points from earlier in 2012. The TEI remained at 54 in August after entertaining average levels above sixty up to June 2012. The uncertainty about the real spending by households, tight investment spending and slowing global trade, adversely impact on trade expectations. Retail sales volumes are maintained by household borrowing increasing by about 4 percentage points more than consumer inflation.

The six month outlook for the key components of trade activity confirms the tentative nature of current trade conditions. After picking up in June, the sales and new order expectations indices remained at lower levels of 64 and 56 respectively in in August. The current volatile trade conditions also led to anticipated lower inventory holdings. Supplier deliveries are expected to improve into positive territory by registering 51 in August up from 47 in July 2012.

Employment conditions in the trade environment improved somewhat as the index increased from 45 to 48, although still in negative territory. Employment prospects declined slightly as the index lost two points to register 48; this is about the same as the August 2011 level when the then robust labour action abated.