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Channel showing resilience as Q2 progresses

It's a bit of a rollercoaster out there, but the channel is showing some positive signs, according to the latest analysis from Context

Channel watchers have been keen to read the runes to try to gauge how much of an economic impact the coronavirus will have on the industry.

So far, there have been a few quarterly financial numbers, but most refer to trading in Q1 before the lockdown really took hold. Chairman and CEO comments have been the main clues to how the business and pipelines are faring.

Given the bleak predictions coming out from organisations like the Bank of England, forecasting a potential 14% shrink in the economy this year, the channel is keen to get a sense of what that could mean for those operating at the forefront of the technology world.

Context, which gets its numbers from Western European distributors, has been keeping a close eye on trading, and charted the rollercoaster that has been the last few weeks.

The channel has already started to show signs of bouncing back, with Context showing that in its four-week rolling average for year-on-year revenue sales growth climbing from -10% in week 16 to +4.6% in week 17, outperforming 2019 figures for the same period of -1.9%.

The analyst house highlighted that resilience in the channel but is expecting Q2 numbers to come in with a 4.1% decline after a robust first quarter had delivered 4.8% increases.

Certain product areas continue to provide the channel with revenue growth opportunities, including: AV systems, mobile and desktop computing, software, and licenses.

Demand for warranties and service

Recent weeks have also seen demand for warranties and service, ehealth devices, and games consoles. Context is warning that the biggest losers in the second quarter will be telecoms, printing hardware and consumables, displays and infrastructure and security.

“Aside from notebooks and some other consumer products, the challenge for the channel remains demand rather than supply,” said Context global managing director Adam Simon. “With most of Europe still furloughed, B2B projects have been put on hold, while consumer sentiment is dropping fast as unemployment bites and savings are depleted.

“However, there are some bright spots. Mobile computing and software will account for nearly €7bn in revenue in Q2 and computing components are making a turnaround as supply issues ease,” he added.

With the economic problems having been sparked by coronavirus rather than the financial crisis of 2008 the hopes are that any recession will be a short one.

The Bank of England’s latest Monetary policy report shares that view, although warns of pain to come in the short-term.

“The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world. Activity has fallen sharply since the beginning of the year and unemployment has risen markedly,” the report said.

“Economic data have continued to be consistent with a sudden and very marked drop in global activity. Oil prices have been volatile. There have, however, been tentative signs of recovery in domestic spending in China, and this is likely to be echoed in other countries that have started to relax Covid–related restrictions on economic activity. Financial markets have recovered somewhat over recent weeks and risky asset prices have picked up from their lows in mid‑March,” it added.

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