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TRADE: Cautious Summer Trade Outlook for Importers and Retailers

 





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According to Chester Trade Finance executive director Jake Lerman, the outlook for summer 2012 is cautiously optimistic. The country has benefitted from increased foreign investment and business confidence but consumer confidence numbers reflect that consumers remain wary.


“Despite a better import environment, as well as business confidence and investment in the country - in July 2012 SA reported a ZAR47,1-billion increase in FDI from 2011, consumers seem to be considerably less upbeat than they were last year. For the last quarter of 2010 and first quarter of 2011 consumer confidence stood at 14 and 9 points (by way of comparison the all time high was 23points in March of 2007.) For the last quarter of 2011 and first quarter of 2012 the index stood at 5, which is a considerable drop. If consumer confidence continues to drop it may mean a very lean summer for businesses. Low interest rates, including the recent 50 basis point decrease, though continue to entice consumer spending in spite of the low confidence,” says Lerman.

“Consumer confidence has been slowly increasing since 2008, where it was -12 points, up to a high of 15 in Q3 of 2010, but it has since been slowly tapering off to 5 points for the 4th quarter of 2011 and first quarter of 2012. The average reading for the CCI since 1994 is +6 index points – with the CCI currently at +5, consumer confidence is at a fairly neutral level, neither supporting nor impeding consumer spending. Hopefully this represents a plateau and we’ll see an upswing towards the end of the year, but extrapolation off previous years movements doesn’t bode well for retail, and without a sudden upswing in Q2 results, I don’t think we’ll see it picking up much over the 5 point mark, which would translate into a leaner Q3 and Q4,” explains Lerman.

This will mean importers will need to navigate the tricky road of forecasting the Rand as well as consumer’s intentions for the upcoming Q3, Q4 season in order to stock up strategically. Currently, we’ve seen bad debt numbers drop in the country as consumers opt to pay off debt before spending, but the low interest rates are still enticing consumers. Possible drops in the petrol price will also hopefully see consumer confidence increase over the next two quarters

“Importers of stock, particularly the SMME sector, should be cautious of the summer retail performance, opting to concentrate on value rather than expecting excessive spending from consumers. The Rand has gone from 7.40 in February 2012 to around 8.20 currently. But with relative calm slowly returning to global markets, increased appetite for risk and further monetary policy easing expected from the ECB and Bank of England, it appears likely that the Rand will still strengthen a little against the dollar towards the end of the year,” explains Lerman.

“For 2012 it will be all about timing and stock levels for importers. They’ll need to take advantage of a strengthening Rand while still not overstocking themselves for summer sales from cautious consumers,” concludes Lerman.


 
 
 
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