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Why are officials concerned? If 40% of Americans catch coronavirus all at once, just 5% of those cases could overwhelm healthcare capacity. This is true for most countries.
Policymakers seek to slow coronavirus's spread. Their main tool is
social distancing
. If they succeed, lives will be saved, global impact muted. Unfortunately, what's good for human survival could exact a nasty toll on economies.
Unlike any other period, coronavirus is affecting both demand and supply. On the demand side:
For consumers and small businesses, the following could start to occur, including:
Simultaneously, there is a strong risk for unprecedented supply threats, including:
Companies will seek alternative suppliers. Global decoupling will
not be easy to execute during a pandemic
. The logistics, timing, and cost of such change casts doubt that this can be a quick painless fix. Scarcity is n
ot an option; payroll must be funded and debt payments must be serviced.
Scarce parts get expensive quickly. How much would you pay for a high demand item in short supply? Ask a N95 mask dealer. This will impact individuals and corporations alike.
Weak discretionary demand coupled with supply shocks increase the odds of a recession in the United States. The travel and leisure industries would be among the first to lead job cuts providing cover for other firms to start layoffs.
The Federal Reserve responded Tuesday,
cutting rates by 0.50%
. Markets still have anxiety about the virus fallout. However, rate cuts will not spur more cruise bookings or deliver products from shuttered factories. A fiscal response is needed in a highly non-political fashion.
Short-lived or not, will coronavirus trigger an uptick in bankruptcy filings? Yes. That and much less sleep for turnaround professionals.
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