South Africa recorded a trade surplus of R37.42 billion for July, this as exports increased on the back of improving global demand. However imports are expected to remain restrained due to weak domestic activity says an economist.

Th South African Revenue Service (SARS) on Monday released trade data for July 2020, which was largely driven by export activity. Exports were valued at R122.49 billion, while imports were valued at R85.07 billion.

Month-on-month, exports increased by 6.1% or by R7.06 billion between June and July. While imports increased by 22.1% or R15.37 billion between the two months.

"Export activity has picked up in line with the increase in global demand," said Investec economist Lara Hodes. This coincides with the easing of Covid-19 lockdown restrictions globally.

Hodes noted that while imports have "edged up" on a month-on-month basis, "weak domestic consumption and investment demand" are limiting factors. " While restrictions were largely eased in SA for the industrial sector under alert level 3, some producers likely continued to operate below capacity, owing to supply constraints and muted demand," said Hodes.

In the absence of second waves of Covid-19 and the continued easing of restrictions, exports are expected to continue recovering, said Hodes. But the recovery will be negatively impacted by subdued global demand and suppl side constraints, she added.

"Import growth will likely continue to remain restrained by weak domestic economic activity," said Hodes.