Couple potential reasons.
1) Not all faction hits are equal. So it could be the quests you're doing raise Merchants slower.
2) Your race/class/diety combo makes it so that you had such a huge negative modifier that you're only just now hitting threateningly while you're actually nearing max faction with them.
This may explain it.
http://wiki.project1999.com/Game_Mec...tem_and_Levels