Author: Business Tech
Moving gradually to lower levels of lockdown should mean that the retail sector can look forward to an increasing number of their tenants reopening and also foot traffic increasing along with spending.

But even with lockdown being phased down – and eventually out – there are no guarantees that a ‘full’ consumer recovery will be quick, says FNB property strategist John Loos.

Instead, full recovery could conceivably lag the end of lockdown considerably, given the magnitude of the financial “knock” that the household sector has taken, he said.

“A simplistic assumption may be that household disposable income returns to its pre-Covid-19 crisis level, consumer spending follows suit and also returns to its pre-Covid-19 level, and this translates into retail sales returning to similar levels to pre-Covid-19 too – all fairly quickly once lockdown is fully phased out.

“But such assumption may be unrealistic,” Loos said. “One should assume that a portion of the more ‘financially fragile’ businesses in the country won’t make it past the full lockdown period, with a loss of revenues of even a few months being more than they can manage.”

Loos added that portion of the country’s production capacity has likely been damaged, and will remain damaged even after the lockdown is over, lowering its potential output.

“That contributes to post-lockdown employment constraints, which dents household income in the long run, too. This makes it likely that in the post-lockdown phase the country’s consumer demand won’t immediately recover ‘fully’ to pre-Covid-19 levels.”



FNB forecasts that during 2020 real household sector disposable income is expected to contract by 7% in 2020. This will cause a simultaneous decline in real household consumption expenditure of around  7%, Loos said.

“A significant growth rebound off the lower 2020 base is foreseen in a post-lockdown economy.

“But forecasts of +3.2% and +0.5% growth for 2021 and 2022, respectively, in both real household disposable income and real household consumption expenditure, means that even by 2022, the level of real household consumption expenditure will still be -3.54% below the level in the pre-Covid year of 2019.”

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