The South African Chamber of Commerce and Industry (Sacci) in a trade conditions survey for last month, released on Wednesday, said that there was a cooling off of trade conditions on the back of Eskom power constraints and fuel price hikes.
The survey found that although 59 percent of the respondents had optimistic expectations in April, expectations in August for the next six months declined to 56 percent positive respondents.
However, the number of businesses that experienced improved trade conditions increased from between 35 percent and 48 percent over the past six months, even though 56 percent or just more than half of the respondents experienced better trade conditions in August than a year ago.
Output growth in the trade, catering and accommodation sector slowed to 0.7 percent year on year (y/y) in the second quarter of 2022 compared to 6 percent y/y growth in the first quarter.
All components of trade activity including sales, new orders and the backlog on orders improved over the six months prior to August.
“It is notable that 49 percent of respondents are employing more staff than the 28 percent in March,” Sacci said.
Inflationary pressures that were intensifying over the first seven months of 2022 appeared to be plateauing out in August as 70 percent of respondents saw sales prices increasing in August, with 67 percent anticipating sales prices to rise over the next six months.
Operating costs also slowed as 88 percent (91 percent in July) of respondents experienced rising input prices/tariffs, while 82 percent still continue to believe input prices will continue to rise over the next six months. Although fuel prices declined slightly in August, the price of diesel as a basic input, for instance, was still 57 percent higher than in August 2021.
The multiplying effect of fuel and basic inputs led to consumer inflation reaching 7.8 percent in July and producer inflation at 18 percent.
“With higher interest rates and real household spending under pressure, the inherent cost push dynamics will continue to restrain the trade environment,” Sacci said.
In addition, load shedding, the consistently high crime rate and logistical constraints were among the most pressing external factors listed by respondents to stifle trade. Hospitality and notably accommodation and events venues are starting to show some signs of recovery, which was very encouraging with the last quarter of the year normally serving as a peak period.
Respondents complained that the government was not assisting and did not respond to calls to engage with small, micro, macro and medium-sized enterprises as one of the biggest sectors that could improve the ailing economy and create jobs.
Respondents also noted that consumers were very price-sensitive and scaling down to more affordable products and services.
The trade conditions (still subdued with TAI below 50), although fragile, still managed to notch up an increase in employment, with 49 percent of respondents increasing their staff in August 2022.
After only 43 percent of the respondents in July expected to hire more staff over the next six months, some 45 percent in August intended to increase staff over the next six months.
BUSINESS REPORT