Trade activity stable, but recession likely to take its toll in coming months
While trade conditions remained relatively stable in May, a South African Chamber of Commerce and Industry (Sacci) index shows the recession and credit rating downgrades are expected to be a drag in the coming months.
Sacci’s trade activity index climbed from 45 in April 2017 to 49 in May 2017, remaining below the neutral 50-point level.
SA is in a technical recession, after Statistics SA announced GDP contracted 0.7% in the first quarter of 2017.
The largest negative contributor to growth was the trade, catering and accommodation industry, which slumped by 5.9% and accounted for 0.8 percentage points of the contraction.
Sacci’s seasonally adjusted trade activity index improved by two index points in May compared with April, rising to 47, but was two points lower than a year earlier.
The seasonally adjusted trade expectations index also remained in negative territory, dropping to 48 index points in May from 49 in April.
It is significantly down compared with the optimism seen in February, when expectations were at 63 index points.
Sacci said on Wednesday: "It appears that the recently announced recessionary conditions and junk status by reputable rating agencies are still weighing on trade conditions."
Respondents also indicated that unstable and unpredictable economic policy, changes in currency value, political instability, a lack of leadership, and low levels of business and consumer confidence, made business management exceedingly difficult.
Sales volumes recovered from 44 points in April to 52 in May, and the new orders index was nine points higher from a low of 40 in April.
The expectations sales volumes index was at 54 — compared with a high of 73 in February — while expectations for new orders declined from 50 to 49 in May.
The employment outlook in the trade environment for the next six months weakened further — suggesting the already high unemployment rate of 27.1% could worsen.