COVID-19: recession types, recovery scenarios, behavior change.
What do the markets tell us?
Of course, the business has taken care of the stock levels. Companies that use Chinese components have more stocks than at other times of the year. It’s possible that someone could change the supply chain. Technology will help to mitigate the impact of the suspension of work in China, but not fully compensate for it. So part of the world economy can work even in quarantine. It doesn’t cancel the negative effect, but it’s a way to reduce it.
And what happens to demand? Fear has reduced the demand for certain services. People stopped going to shopping centers, cinemas, etc. The demand for travel has fallen all over the world.
The overall effect is still negative, but it is weaker than in the past, thanks to Amazon, Netflix and online games. After all, people who are at home with their families all the time need something to distract them. So online commerce is gaining momentum. And the demand for networked computer games increased by 40% year-on-year (PRC).
Also, the growth of online shopping will reduce the impact of the epidemic on demand. The impact on the demand for this or that company depends on what it trades. Luxury brands suffer. But for basic goods, the transition to online shopping can be a long-term trend.
The coronavirus effect is to reduce the demand for resources. Decreased demand for raw materials such as copper can recoup losses as production resumes. This “accumulated” demand will support prices in the future. But with energy resources, it is not that simple. The canceled flight will remain the same. China is a large and not too efficient consumer of raw materials. China’s drop in GDP by $1 per capita has a more severe impact on global demand for resources than, say, a similar decline in GDP in the UK.