Monday, March 16, 2020

"Planning For Recovery: Lessons Learned From China"

In normal times, retailers plan for the holidays in July and August. These are not normal times. But it’s not too far afield for retailers to start planning ahead for normal times — or to envision what their businesses will look like 45, 60 or 90 days hence — because if China’s experience with the coronavirus is any teacher, the recovery of the U.S. economy is most likely about six weeks out.

Recent reports from China show how bad its economy dipped and how much it’s coming back. Most reports put China in the initial stages of recovery. Six weeks after the initial outbreak, supply chain congestion stands at 73 percent of 2019 levels, up from 62 percent at the worst part of the epidemic.

That means 73 percent of Chinese goods are actually getting through to store shelves. Coal consumption (not the most environmentally-friendly metric) has bounced from 43 percent  to currently 75 percent of 2019 levels. Overall confidence is also climbing. Here’s a mind-boggling stat about how close the Chinese economy came to shutdown: real estate transactions fell to 1 percent of 2019 levels. They’re now at 47 percent.

“Services and consumption now contribute more than half of China’s GDP,” Bert Hofman, a former China country director for the World Bank, told the FT. “The economy is therefore more sensitive to a drop in domestic demand resulting from the epidemic and the government’s control measures. It is harder to make up lost ground in services than it is in manufacturing.”

So while the economy is struggling to regain its footing in China, its also evidence that its draconian measures to contain the virus worked. They may not have been implemented quickly enough. As several publications have reported, epidemics rise and fall with the rate at which populations interact. They also challenge the accuracy of reporting methods, such as the amount of people being tested.

“When we see cases jump suddenly — for example as we’ve seen in the U.S. recently — that reflects a testing capacity issue, rather than being a true reflection of the epidemic itself,” Caroline Buckee, an associate professor of epidemiology at Harvard School of Public Health, told Wired....
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