South African trade conditions experienced improvements in activity in the second half of the year, which was sustained over and above seasonal performance, the South African Chamber of Commerce and Industry (Sacci) reported on Tuesday. 

The Sacci nonseasonally adjusted trade activity index (TAI) increased five points to 57 in November, up from 52 in October. Even if the TAI is adjusted for seasonal factors, the index was still higher at 53 in November compared to 50 in October.

“If compared to a year ago, the seasonally adjusted TAI was four index points higher than in November 2011. The improvement in the TAI in the last two months suggests stronger retail activity over the Christmas season,” Sacci said in a statement.

After all the subcomponents of trade activity, apart from employment, turned positive in October, the progressive trend continued into November with the consequence that employment in the trade environment also improved.

Following the labour disruptions in August and September, business-to-business trade recovered in November. The recovery in sales and new orders that started in October, remained vibrant in November, but the build-up in inventories slowed marginally from 53 to 52. 

Supplier deliveries remained in positive territory at 57 from 55 in October 2012.

Sales and input prices did not change meaningfully between October and November, as the continued rise in labour costs, higher utility tariffs and a continued weakening of the rand affected input prices, although tight trade conditions kept selling prices from increasing accordingly.

The impact on expected prices of sales and inputs, however, is more visible in the price indices for the next six months. Sales prices are expected to increase by a further 3 index points to 68 (13 points up from July) and input prices are expected to increase by 2 points to 75 (12 points up from July).

Meanwhile, the six-month trade expectations index (TEI) deteriorated to 51 in November from 53 in October.  This is the lowest figure for the TEI since June 2009.

“The TEI averages for the first eleven months of 2012 and 2011 were 59 with both years characterised by lower expectations towards year-end.  The uncertain circumstances in the South African economy and abroad and growing domestic price pressures continued to lower the outlook for trade conditions in the first few months of 2013,” Sacci said.

The trade outlook at 51, being 6 index points below current conditions, is an exceptional occurrence as the gap between the TEI and TAI is usually positive. The last time the gap was negative was in November 2007 and this confirmed the associated uncertainty and reduced optimism about the short term. 
“Employment conditions in the trade environment eased in November and moved into positive territory as temporary seasonal employment opportunities became available in the trade environment.

“In November the employment index increased by 4 points to 51.  Employment prospects also improved slightly to 47 from 46 in October,” Sacci concluded.