Retailers and manufacturers are still experiencing a torrid time and it seems as if the festive season will not bring much more joy.

Three sets of information released yesterday paint a bleak picture for the traditionally peak shopping season.

In addition, it seems as if the picture will not change going into the new year.

According to Statistics SA, manufacturing is still in the doldrums.

The seasonally adjusted physical volume and value of manufactured products for the third quarter against the second are both flat year on year (-0,1% and 0,8% respectively).

At current values, the physical volume of goods manufactured increased 2,6% for the year to date against 2010.

 The value of the goods manufactured over this period increased by 8,7%.

The September year-on-year change in volumes was 7,7%.

This does not bode well for the retail industry as one would expect peak season orders to have lifted manufacturing figures slightly.

According to Luke Doig, senior economist at Credit Guarantee Insurance Corporation, their research has shown that orders seem to be coming in later and later as retailers take a more cautious approach.

This is reflected in the new SA Chamber of Commerce and Industry's (Sacci) Trade Conditions Survey for October.  

The trade activity index recovered to a seasonally adjusted 48 in October after losing three points in September. 

The index noted that price pressures increased notably during October 2011 and probably played a role in trade conditions remaining negative.

Anything below 50 points is in negative territory and Sacci CEO Neren Rau says it is worrying that the index has been in negative territory for the last six months.

What is worse is that the expectations index of trade activity in six months’ time came in at 55.

The sales volumes index stood at 52.

Rau explains that the expectations index is usually higher as retailers tend to be optimistic about the future, but this index has been decreasing: “The future, as well as the current situation, is concerning”.

Regarding the current situation, Rau says most retailers were absorbing inflationary pressures themselves and not passing it on to consumers.

But this cannot be done indefinitely and retailers have started increasing prices accordingly. 

“The general gloom in the environment is because consumers have not come to the party yet. Businesses have tried to absorb costs and make prices attractive to consumers but there is not enough activity yet…

“We expect an uptick over the festive season (in retail sales) because it is a seasonal factor… but we expect this to be short lived – the fundamentals that affect this environment have not improved sufficiently to improve trade into 2012,” Rau says.

Doig echoes this, saying the first part of next year will be equally challenging for retailers.

His research indicates that manufacturing could experience a short-term uptick due to restocking, "given that inventory levels have been ruthlessly rundown in recent times with industrial and commercial inventories to GDP falling from 17,3% in 2007 to 12% last year and remaining there in the first half of 2011. 

“In our opinion, recent wholesale sales data hint at a recovery of restocking in the third quarter of 2011, although lower stock levels and later ordering - justified in turn by the uncertain outlook - do appear to be becoming entrenched.”

Doig adds that festive-season sales should grow by at least 7,5% in current prices and around 4% in real terms.

Deloitte also released its annual year-end holiday survey yesterday which showed that local shoppers are extremely cautious about their shopping habits this year. 

According to Rodger George, consumer business leader at Deloitte, 50% of local shoppers believe that the SA economy is in recession (40% in 2010), while 62% of shoppers between the ages of 45 and 64 believe that this is the case.

The researchers expect a moderate increase in sales but consumers are still cautious about 2012.  

As a result, consumers do not intend to max out the credit cards and they will be looking at discounted and store-branded products in order to limit spending.

– hendri@moneyweb.co.za