Trade conditions in South Africa remained strained but stable in July.

This is according to the latest Trade Activity Index (TAI) released by the South African Chamber of Commerce and Industry (Sacci) on Wednesday.

The TAI increased by 2 index points to 40, its second highest level since February 2019. The highest level reached was 41 achieved in May 2019.

The Trade Expectations Index (TEI) declined by 6 points to 42 in July 2019.

"Respondents to the TAI survey toned down their expectations for the next six months, while respondents to the TEI expect all trade activity components to decline in the next six months except for sales prices that may still remain lower," Sacci said in a statement.

The expected lower sales prices result from the current strained trade conditions mainly due to pressure on business to push turnover volumes, according to Sacci.

Business confidence still lagging behind last year - Sacci

"Expected higher input costs continue to narrow profit margins and lower the return on investment in the trade sector. Lower trade activity caused the backlog on orders to decline substantially resulting in lower inventory holdings," it said.

Apart from trade activity indicators, a number of external factors were also mentioned by respondents as impacting on trade conditions.

These are high rental and staff costs; policy uncertainty; continuing labour unrest and industrial action; high electricity and water tariffs, and exchange rate volatility, are complicating trade activity.

Sacci also pointed out that the employment sub-index contracted somewhat in July 2019 to 40 index points from 42 in June 2019, while expected employment conditions in the sector are to weaken considerably as the sub-index declined from 45 to 36.