Both the ABSA PMI and the Trade Activity Index from SACCI, show that role-players are concerned about the strength of the economy.
Added to this is the decline in the international storage of containers transhipped in South African ports. Transhipments declined a massive -19,3% between August and October 2019 versus the same period a year ago. While big shifts are not uncommon in the storage sector, it is concerning when all categories in this subsector are so negative.
The total decline of -14,3% in the amount of goods warehoused between August and October 2019 compared to the same period last year, is a relative indicator of the poor confidence that firms have of short-term economic performance.
Thankfully, interest rates are lower than before and are likely to drop further, reducing the cost of storage. Moreover, the shift to online shopping means that at least from that perspective (albeit small) the warehousing sector has a few positives to draw from.
However, the biggest factor in the broader logistics sector is the lack of confidence that goods will be sold relatively quickly, and that quick refilling of shelves will have to take place.
Retail price increases have remained below overall consumer price adjustments for about four years. In fact, retail prices have not increased over 3% for more than three years consecutively. This best reflects the fight that exists for the consumer’s pocket.
What’s in the pipeline?
Pipeline volumes declined -7% between August and October 2019 compared to the same period in 2018, mainly due to the decline in fuel sales volumes.
Overall, there seems to be no respite for the logistics industry, apart from the short boost to retail volumes thanks to Black Friday and Cyber Monday.
These two selling days may be strong enough to at least see a small improvement, but otherwise, the logistics sector will have to wait until next year. Ultimately though, throughout the supply chain, there are genuine concerns about low economic growth and price pressures.