Trade Conditions Strained but Stable
Trade conditions for the month of July 2019 remained strained but stable. The Trade Activity Index increased by many index points; it is the second highest level since February 2019; the highest was achieved in May 2019. The Trade Expectations Index (TEI) declined by 6 points in July 2019. Respondents to the TAI survey toned down their expectations for the next six months, while respondents to the TEI expect all trade activity components to decline in the next six months except for sales prices that may remain lower. The seasonally adjusted TAI (Trade Activity Index) improved by four index points, the highest level since February 2019, and at about the same level as the index in July 2018.
The expected lower sales prices result from the current strained trade conditions mainly due to pressure on business to push turnover volumes. Expected higher input prices (costs) continue to narrow profit margins and lower the return on investment in the trade sector. Lower trade activity caused the backlog on orders to decline substantially resulting in smaller inventory holdings.
Apart from trade activity indicators, several external factors were also mentioned by respondents as impacting on trade conditions. High rental and staff costs; policy uncertainty; continuing labour unrest and industrial action; high electricity and water tariffs, and exchange rate volatility, are complicating trade activity.
The employment sub-index contracted somewhat in July 2019 to 40 index points from 42 in June 2019 while expected employment conditions in the sector are to weaken considerably as the sub-index declined from 45 to 36.
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