Kavith Harrilal
2 minute read
18 Jan 2012
00:00

Stagnant first half ahead

Kavith Harrilal

ALTHOUGH trade conditions slumped significantly in December 2011, businesses are of the view that conditions appear more favourable in the second half of this year. ...

ALTHOUGH trade conditions slumped significantly in December 2011, businesses are of the view that conditions appear more favourable in the second half of this year.

This is according to the CEO of the South African Chamber of Commerce & Industry (SACCI), Neren Rau, who told The Witness yesterday that while the festive season retail spree failed to lift the overall activity level, trade expectations were more positive.

He conceded that the non-seasonally adjusted Trade Activity Index (TAI), which came in at 39 in December 2011 from 53 in November 2011, was “alarmingly low”.

However, the Trade Expectations Index (TEI) came in at 59 compared with the six-month average of 55.

“We did expect a low TAI number, as this Index usually peaks in November with a high level of business to business activity. It then usually tapers off in December with only retail registering significant growth.”

Rau said that the latest TAI could also indicate that retailers experienced a less-than-desirable festive season.

While the sentiment of business owners plays a major role in the TEI, Rau stressed that the business community expects a strong performance in the second half of 2012.

“Businesses believe that a lot of the major crises we have experienced in the recent past are now behind us.”

This view is clearly supported by the performance of the JSE All-Share Index, which reached a “lifetime high” level of 33 422 in trade yesterday. With markets being forward-looking by nature, Rau agreed that this improvement will be carried through into 2013.

While input costs remain high, posing a major threat to the margins of companies, Rau said that selling prices would remain high as relatively strong demand supported these high price levels. The survey last month predicted a six-month outlook for sales and input prices of 70 and 75 respectively.

“We certainly do not believe that 2012 could be worse than 2011, although the global environment could spring another surprise. I expect a stagnant performance in the first six months of the year, followed by a sharp pick up in activity in the second half and in early 2013.”

Although it is more positive than the economic performance of 2011, this outlook is not expected to deliver significant levels of employment creation. A United Nations study yesterday predicted an effective global economic shrinkage on a per capita basis, unless there is rapid action to create jobs.