Trade conditions in the South African business environment deteriorated slightly in September, the latest Absa/South African Chamber of Business (Sacob) Trade Conditions Survey has found.
”Even though the trade conditions are still in positive territory, the lower September trade activity index endorses the less vibrant trade conditions that are setting in,” said Sacob economist Richard Downing.
”This development is probably in line with the anticipated adjustment to tighter financing conditions expected over the medium term,” he said.
According to the survey, there was a lower proportion of rising sales and new order volumes, and less experience of inflationary pressure reported in September.
However, many businesses expected inflationary pressures to rise in the next six months.
”If the rand should remain at its weaker levels, existing inflationary forces in the economy will be aggravated and may cause consumer price index inflation to perhaps exceed 8% in early 2007,” said Absa chief economist Christo Luüs.
”This might necessitate a longer period of interest-rates tightening than previously envisaged. This possibility has not yet been fully incorporated into the general market conditions outlook of businesses,” he said.
The survey assesses trade conditions using the trade activity index (TAI) and the trade expectations index (TEI).
The TAI is a composite index of sales volumes, new orders, supplier deliveries, inventory levels and employment. The TEI measures trade condition prospects for the next six months.
The TAI was at 54,4 points in September, down from 56 points in August and 4,8 points lower than the 59,2 points registered in May.
”The lower September TAI figure is in line with the higher inflationary and tighter monetary policy environments that have since emerged,” said Luüs.
The TEI reading went down to 65 points, from 68 points in August. — Sapa