Filomena Scalise

The trade activity index‚ which indicates how businesses feel about current trading conditions‚ rose to 50 in August after falling to 45 in July‚ its lowest level since December.

The index was released by the South African Chamber of Commerce and Industry (Sacci) on Wednesday.

An index level of below 50 represents negative territory‚ while one above 50 is positive.

In July last year‚ the index stood at a low of 38 in a period marked by heightened and militant labour action.

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‚ the sales and new orders indices both registered 49 in August.

The inventories index increased from 45 to 48 in August‚ with supplier deliveries improving from 42 in July to 50 in August.

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. 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) was steady at 54 in August and July from 61 in June. 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 four percentage points more than consumer inflation.

The six month outlook for the key components of trade activity confirmed 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 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.

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. - I-Net Bridge