The South African Chamber of Commerce and Industry (SACCI) seasonally adjusted Trade Activity Index (TAI) rose to 47 in May from 45 in April and 43 in March, but remained in contractionary territory (below 50) for the fifth consecutive month.
Last week the SACCI Business Confidence Index fell to 93.2 in May, the lowest so far this year, from 94.9 in April and this year’s high of 97.7 reached in January. SACCI blamed the drop on political uncertainty after the 31 March cabinet reshuffle.
“Heightened political tensions, additional economic policy uncertainty and lower credit ratings by rating agencies that converged towards the end of March 2017, continued to effect the business climate negatively in May 2017,” the lobbying group said.
South Africa entered a recession in the first quarter 2017 after a contraction in the fourth quarter 2016 as well, so respondents to the SACCI TAI said that the unstable and unpredictable economic policy had resulted in a volatile exchange rate, which made business management exceedingly difficult. High unemployment and crime levels were also notable worrying factors given the recessionary conditions.
Although sales volumes plunged in April due to the many public holidays as Easter shifted from March last year to April this year, in May there was a recovery to expansionary territory as the sales volumes index improved to 52 in May from 44 in April.
The new orders index also showed a rebound and recovered to 49 in May from 40 in April. The expectations sales volumes index however remained subdued in May at 54 after reaching a high of 73 in February 2017. Expectations for new orders index also declined from 50 in April to 49 in May 2017.
The inventory index dropped to 42 from 47 in April 2017 due to lower sales expectations. In the first quarter the economy had added to inventories with large increases in inventories reported for wholesale trade and the transport, storage and communication industry, but these stock builds were partially offset by a drawdown of inventories in the manufacturing sector as production could not keep up with demand.
The selling price index and the input price index remained virtually unchanged for sales prices at 61 in May from 62 in April, and 63 in May 2017 from 62 in April for inputs costs. As yet the easing in consumer inflation from 6.8% year on year (y/y) in December 2016 to 5.3% y/y in April 2017, as well as the drop in producer inflation from 7.1% y/y to 5.2% y/y over the same period has not yet been reflected in price expectations as they remain above the 50 level with the sales price expectations index steady at 68 in May and April, while input price expectations index eased marginally to 66 in May from 76 in April.
The employment sub-index edged up to 49 in May from 48 in April. The employment outlook in the trade environment for the next 6 months weakened further and could add to unemployment, as the employment expectations index slipped to 41 in May from 43 in April.