The world has changed, welcome to the COVID-19 Economy.
Relaxing afternoon at the farmers market has now become waiting in line ups for that last roll of toilet paper. COVID-19 / Coronavirus is changing our way of life.
Many of us are sheltering at home memorized by Netflix as our bank balances slowly dwindle. The hope is we can see the infection curve flatten, so we can all go back to work in the next 2- 3 months.
Unfortunately, The North American economy is so dependent on us spending money on food, gas, rent or mortgages. The longer we all take the foot off the spending accelerator the worse things will become. But of course, if we go back to work too soon it will extend the negative financial impact.
The big economic deflation and/or depression is coming next. We’ll talk more about deflation later in this post but let’s look at few industries that are being affected.
Traditional Retail
Clothing, jewelry, home accessories stores, especially in enclosed areas, like Orchard Park Mall have closed.
I haven’t seen the mall parking lot to empty in the middle of the day except on a national holiday. Last time I checked only 4 stores are open of the 150+ stores in Orchard Mall is open.
Other malls and retail shopping areas only have food, drug store and liquor stores open.
Home Improvement Stores
With all that time at home away from others what a great time to work around the house. Time to break out the cleaners and furniture polish and spring clean the house.
Time to organize the basement/garage and throw out all those boxes of junk, although you cant arrange for pick up or drop things off at. Donations are not being excepted at this time.
I might get a chance to thatch the lawn, fertilize and move the lawn.
Restaurants
For many restaurants, the Coronavirus is a mixed affair. Granted sales are way down, but many can remain open in form or another.
Most have closed their seating areas and now going to their drive-thru, pick up and delivery options. Better than having to close entirely.
Unfortunately, many restaurants have relied on delivery services like Skip the Dishes and Door dash for competitive reasons. These delivery apps are very convenient for customers but hard-on restaurant owners because they take a large percentage of the profit of each order.
If you want to help local restaurants try ordering directly from the restaurant of your choice (from their website or by phone) rather than using your favourite app.
Online Retailers
Those companies that have not been able to adjust to online realities are finding self-isolation another nail in the coffin. Many retailers rely on foot traffic to make sales targets.
Other retailers have invested in online sales method of doing business. The evidence is the UPS truck has come to our neighbourhood 5 times this week alone.
Movie Theatres / Cruiseships
If you can’t meet in crowds then it goes with saying the movie and the cruise ship industry are hurting.
If they don’t have cash saved 3-4 months of zero cashflow, then its very likely many of these companies will be gone.
Necessary Businesses
Farmers, Food stores, gas stations, utility companies, health and financial service providers should go right along even when things stop.
Since most of us need to eat, heat/cool our homes, receive health care and pay our bills these areas of the economy will be last impacted in a total economic slowdown.
What it has also made me realize, better-paid health care workers are vital to our way of life, as are lower paid grocery store/drugstore workers. Who knows, maybe the current situation might have a positive effect on income inequality. But I’m not holding my breath.
We could see a deflation spiral. Right now Companies are desperate to keep afloat. To make up for being closed, many will discount prices to encourage sales. If sales don’t come back soon enough the next step is to laying off workers to compensate. If this cycle continues, this leads to a deflation spiral.
The recent government financial programs like the Canadian Emergency Response Benefit is the putting the money in the hand of consumers – hopefully, this will be enough to get us through the Corona Virus.
Check out the recent podcasts from Freakonomics, one of my favourites, that explores economic side effects of what happens with when all shelter at home. (Not that I think this isn’t a good idea, because it is!)
In my next post, I’ll cover who is going to pay the economic effects of the Virus over the next few months.