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Deteriorating trade conditions will contribute to higher unemployment – Sacci

Trade conditions remained in negative territory in May, the South African Chamber of Commerce and Industry (Sacci) said on Wednesday, with its Trade Activity Index at 49.

While this was an improvement on the 45 recorded in April, Sacci raised concerns about the index remaining below the neutral 50-point mark.

Further, compared with May last year, the index had declined by two index points.

Meanwhile, Sacci noted that the seasonally adjusted Trade Expectations Index (TEI) remained in negative territory and declined by a further index point to 48 in May, from much improved trade expectations in February when the TEI was at 63.

“Trade expectations deteriorated to such a degree that the TEI stood at 48 in May. It appears that the recently announced recessionary conditions and junk status by reputable rating agencies are still weighing on trade conditions,” Sacci said in a release.

Apart from the recessionary conditions, respondents indicated that unstable and unpredictable economic policy, shifts in currency value, political instability, lack of leadership and low levels of business and consumer confidence, make business management exceedingly difficult. High unemployment and crime levels were also highlighted as notably worrying factors.

Recent sales volumes that were hard hit in April, recovered substantially, with the sales volumes index improving from 44 in April to 52 in May. The new orders index also improved and was nine points higher from the exceptionally low 40 in April.

The expected sales volumes sub index remained subdued at 54 in May, after reaching a high of 73 in February. The expected new orders sub index also declined one index point to 49.

The inventory index dropped to 42 in May from 47 in April, owing to lower sales expectations. The selling price index and the input price index remained virtually unchanged at 61 in May from 62 in April for sales prices, and 63 in May from 62 in April for inputs costs.

“Although still high, the price indices endorse lower consumer and producer inflation at present. Inflationary expectations indices remained high,” said Sacci. The sales price expectations index stuck to 68, but expected input prices especially eased as the index declined from 76 in April to 66 in May.

The employment sub index remained reasonably stable on 49 and one index point higher than in April. However, the employment outlook in the trade environment for the next six months weakened further and could add to unemployment as the employment expectations index declined by two index points to 41 in May.

Source : Engineering News