The 17.6% year-on-year increase in July 2008 liquidations to 320 is exactly in line with our expectations of a 20% increase. Payment defaults by debtors have been escalating sharply for almost two years, and our latest experience sees no let-up in this trend.
The year-to-date (to July) increase in business failures is officially 11.5% whereas we have incurred a 21.1% increase in the number of claims paid in the first eight months of the year, with an almost 31% hike in the rand values involved. Company closures rose 31.8% in July although the year-to-date figure is 5.7% down on 2007 levels. Liquidations of CCs were just 4.9% higher in July and smaller enterprises appear to bearing the brunt of the tougher operating onditions, being 31.4% higher in the first seven months of this year.
Most of the secondary sector held up fairly well in the July release, with the tertiary sector taking the most strain. The wholesale and retail trade industry showed a 28% month-on-month deterioration (75 to 96 closures) while on a year-no-year basis, the broader financial and business services sector experienced 45.5% more closures (101 to 147). The logistics sector (transport, storage and communication) saw a 200% year-on-year increase as escalating operating costs took their toll.
Consumer inflation may well trend higher still, especially if the latest alarming producer inflation figures are factored in. For quite some time we have been indicating that insufficient attention has been given to the knock-on effects of factory gate prices. However, we would hope the South African Reserve Bank has taken this fully into account in their inflation forecast and as such would have made a pre-emptive move with rates at the August Monetary Policy Committee meeting, if need be. Hence we trust there will be no shock for businesses or consumers in the months ahead via another rate hike.
Article provided by: FAnews