Business resumption drops further as lockdowns continue; vaccination essential for recovery: Nomura


Continuing lockdowns in several states have led to a further decline in business resumption, and economic activity has now dipped to levels seen in June last year, a Japanese brokerage said on Monday.

Using a proprietary index of gauging activity deployed since the national lockdown last year, Nomura said the worst hit to the activity will occur in May, followed by a sequential improvement in June.

“Lockdowns look to spill into June, but a few states are announcing a slow rollback of restrictions as their virus caseloads fall, which suggests a sequential improvement in activity in June,” the brokerage said.

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The business resumption index slipped to 60 for the week ended May 23, down from 63 in the previous reporting week, it said, adding that these levels were last seen in June 2020.

Both mobility and non-mobility sectors have been hit, it said, pointing out that Google’s workplace and retail and recreation mobility indices fell by 5-6 percentage points, while the Apple driving index bottomed and rose by 3.4 percentage points.

Power demand continued to contract, down by 5 percent, while the labour participation rate moderated to 39.4 percent from 40.5 percent, with the unemployment rate up to 14.7 percent from 14.4 percent last week, near its one-year high.

For a sustained recovery, the pace of vaccination needs to pick up, which is expected to happen only after June, it said.

Meanwhile, analysts at Kotak Institutional Equities said they see “first sights of green shoots” in the economy impacted by the second round of coronavirus infections.

“Most metrics show a significant decline but we could be at the trough of economic activity,” the analysts said.

Mobility metrics, trending downwards across India, have started to improve in Mumbai and Pune.

Mumbai and Pune were two of the first cities to peak in the second wave, it pointed out.

Stating that most of the states have “peaked” in terms of infections, they also flagged the slow pace of vaccinations as an area of concern.

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