By Angel Abcede
ALEXANDRIA, Va.—While historic job losses and the current unprecedented recession in the aftermath of the COVID-19 pandemic are real-life concerns for Americans, a resurgence of economic activity on the other end as businesses reopen is likely, based on past circumstances and the current financial climate, economist Anirban Basu said during the session, The Return of the Economist, in the just-released NACS State of the Industry (SOI) Virtual Experience.
That will bode well for the convenience channel, which has maintained its foothold in the economy as the federal government has deemed c-stores essential businesses, said Basu, who is chairman and CEO of Sage Policy Group, Baltimore.
That’s not to say the outlook isn’t dire. New York-based Morgan Stanley is predicting the nation’s gross domestic product (GDP) will drop by 30%, Basu said. GDP during the Great Depression fell 8.4% in comparison.
Even before the coronavirus emergency, economists were concerned about the country’s 10-year growth in jobs and economic activity, set against the underlying warning signs of manufacturing losses, trade wars and both consumer and commercial debt. Where Baby Boomers entered into “jobs they loved” in manufacturing and construction, that productivity is ebbing. Basu said younger generations are working in more dispassionate jobs, businesses are not investing in training and workers are not using the best equipment, he said.
Still, while not claiming to be an epidemiologist, he said “the best minds” are working on vaccines and therapies, and areas of Europe and even here in the United States have shown signs of moving past peak infection and death rates.
When the economy is set to recover, Basu said inflation has remained low, allowing the Federal Reserve to lower interest rates to practically zero. He also predicted pent-up demand will be high. “People before [the pandemic] were wanting to buy car,” he said, extending the analogy to homes. “Interest rates can only fall. And when supply runs out, inventory has to be replenished.”
Looking at past epidemics in Asia, Basu said he expects a “rapid recovery in activity” when the economy resumes. “It won’t be a complete recovery,” he said. “There will be a lot of empty storefronts and shattered businesses, but the initial recovery will be more dramatic—not a U [shaped curve] but a V.”
(View this session and the complete NACS SOI Summit Virtual Experience on demand by clicking here. Video presentation viewing is available for download until September 1, 2020.)
Angel Abcede is a senior editor and tobacco editor at CSP Magazine.