Fewer liquidations but little sunshine ahead

Fewer companies in the freight industry have fallen by the wayside in the first 10 months of the year compared to last year, but conditions looking ahead are still shaky. According to Luke Doig, senior economist of the Credit Guarantee Insurance Corporation (CGIC), official liquidation statistics from Stats SA for business generally reveal that October closures were 12% down on the same month last year – and year-to-date failures some 15.8% lower. “Transport, storage and communication liquidations so far in 2014 have totalled 73 (4.1% of the total of 1 772) compared to 93 out of the total 1 904 at the same stage last year (4.9% of the total),” he told FTW. “So the incidence level has improved so far this year – although the particular outcome of two failures in October 2014 was on a par with October 2013.” And in the freight industry it appears that what you win on the one hand, you might be losing on the other. “Obviously,” Doig added, “this sector should be benefiting from the fall in recent months of a major input cost – fuel. But the moribund economy will have detracted from that.” And from what Doig has gathered from members of the industry, the muchanticipated pre-Christmas rush has been a bit of a f lop. “Anecdotal evidence,” he said, “would tend to suggest that this sector has not seen a major upward shift in demand that one would expect around the year-end trading season.” And indeed, CGIC’s own forecast for the year-end is not too bright. “The official Christmas sales (December) outlook expects retail sales to expand 6% in nominal terms with f lat real growth,” said Doig. “This would be the worst outcome since December 2009.” He also pointed to the revised gross domestic product (GDP) figures which were released the day he talked to FTW last week. “From these,” Doig added, “our full-year GDP forecast remains at 1.3%. “Looking ahead, we are more cautious on growth at 2% in 2015 (taking into account electricity constraints) versus consensus views of around 2.5%. This, while the slightly more subdued inf lation outlook may provide a degree of respite against further interest rate hikes next year.” And Doig’s crystal ball does not ref lect particularly strong sunshine looking ahead. “While the future outlook appears to offer improved prospects for the transport sector,” he said, “trading conditions will not improve materially.” INSERT & CAPTION We are more cautious on growth at 2% in 2015, taking into account electricity constraints. – Luke Doig