How industries can weather the economic impact of COVID-19

a closed sign in a store window

There is no economic immunity to COVID-19. The virus is infecting every corner of the global economy at an astonishing speed.

This pandemic is economic as well as biological. The viral outbreak that originated in China – shutting down factories, stores, restaurants, airlines and hotels in that nation – is now sweeping across the world’s economic ecosystem.

Will there be a global recession due to COVID-19?

Economists at Morgan Stanley, Goldman Sachs, and S&P Global are now forecasting a global recession.

JP Morgan, America’s largest bank, predicts global economic growth shrinking by 12 percent in Q1 and another 1.2 percent in Q2.

“The key outlook now is gauging the depth and duration of the 2020 recession,” Bruce Kasman, JP Morgan’s head of economic research, told CNN Business.

Here’s a look at how key industries are being affected by a worldwide downturn that could be unprecedented in both scope and speed.


Manufacturing is one of three sectors being hit hardest by COVID-19, along with mining and accommodation/food services, according to Eva Koronios, an industry research analyst at IBISWorld.

“The manufacturing process is highly reliant on globalized supply chains, which have already begun to suffer in the wake of the novel coronavirus’s spread due to China’s significance in the global economy,” Koronios told Futurithmic via email from her New York office.

Chinese factories that produce consumer goods for other countries have been shut down for cleaning and disinfection, as well as low labor supply due to sick or quarantined workers.

Koronios noted Canada’s computer manufacturing sector relies on China for half its imported components and said that in the U.S., Apple and Microsoft are already “experiencing supply chain issues and lower consumer demand (for their products) in China.”

In auto manufacturing, Honda said it will suspend production in Canada, Mexico and the U.S. for six days “due to an anticipated decline in market demand related to the economic impact of the COVID-19 pandemic.”

Ford, GM and Toyota are temporarily closing their North American plants until late March or early April to clean and disinfect them. Volvo and Subaru are pausing production at their U.S. plants for a few weeks as well.

Mining, oil and gas

a mine

Lower global demand for raw materials to make industrial and consumer goods is driving commodity prices down, which hurts revenues and hinders new investment at mining, oil and gas companies worldwide.

“We’re also being hit with a large oil price decline since Russia and Saudi Arabia couldn’t come to an agreement (on output),” says Matthew Stewart, director of economics at the Conference Board of Canada. “I expect we’ll see substantial declines in oil production and a further collapse in energy investment.”

On April 20, U.S. crude oil futures were valued below zero for the first time in history. 

Hospitality and food services

In its latest report on 15 international industry sectors, IBISWorld warns reduced tourism by Chinese travellers will harm the global accommodation and food services sectors. It estimates Chinese travellers make up 15 percent of annual visitors to Australia, 10 percent of international visitors to Canada and are among the top 10 most valuable visitors to Britain in terms of spending.

Efforts to slow the spread of COVID-19 will further strain the domestic food and accommodation industries within countries around the world, Koronios predicted.

“As more and more of the world’s countries adopt internal social distancing measures and increasingly stringent shelter-in-place policies, the negative effect of such quarantine measures on these countries’ tourism and food services sectors is also expected to be particularly significant,” she said. 


an airport terminal window view and seats

Besides the drop in Chinese tourists flying to other destinations around the world, airlines are also canceling flights to China, as well as those to Italy and South Korea.

According to IBISWorld, U.K.-based EasyJet and IAG (the parent company of British Airways) have reported significant declines in business. Some European companies like BP, BMW and Estee Lauder are restricting executive travel while many others have canceled huge industry events and trade shows that normally attract attendees from around the world.

IBISWorld expects a “significant drop” in commercial and consumer transportation in the U.S., where it estimates air travel comprises almost 22 percent of the American transportation sector’s GDP.


Retail will take a hit due to a shortage of inventory made in China, a decrease in global tourism, and orders by authorities in many countries to temporarily close all non-essential retail businesses except grocery stores and pharmacies. Growing layoffs and job uncertainty in various industries are also prompting worried consumers to curb their retail spending. In Canada, for example, the consumer confidence index for March fell 32 points, its biggest drop ever.

“This recession is not going to be led by the drop in employment, it’s really the drop in confidence and consumers staying out of stores and restaurants and the impact of that throughout the economy,” says Stewart.

Figures from Barclays appear to back this up. The bank said although China’s manufacturing output fell in February by up to 35 percent due to COVID-19, the effect on China’s service industry was even worse, with output in that sector plunging 70 percent that same month.

Tech and IT

A woman looking at smartphones in a store

As mentioned here previously, tech vendors like Apple and Microsoft are already reporting supply chain disruptions in China. This issue, along with retail store closures due to social distancing measures, will likely slow consumer tech sales.

On the enterprise technology side, IDC has just revised its global IT spending forecast downward in light of the pandemic.

“By the end of 2020, in a pessimistic scenario, IT spending could grow by one percent compared to the original forecast of more than four percent growth, and these forecasts are more likely to trend down than up in the next few weeks,” IDC, which tracks business IT trends in 100 countries, stated in its updated outlook.

The effect of COVID-19 will be different for specific pieces of the enterprise tech market. Among the highlights from Forrester Research’s revised 2020 predictions:

  • Hardware: Computer and communications equipment spending will be weakest, declining by five to 10 percent
  •  Software: Spending on software could slow to a growth rate ranging from zero to four percent
  • Telecom services: Forrester’s outlook suggests telecom services “will hold up better, though contract revisions could cause spending to go down”
  • Cloud: Businesses rushing to enable remote work from home (WFH) are already giving a huge boost to unified communications and collaboration as a service (UCaaS) apps, with Microsoft Teams adding 12 million users during the first 11 days of March and Zoom gaining more users in Q1 2020 than in all of 2019

If COVID-19 touches off a multi-year global recession, “the only positive (IT) notes would be continued growth in demand for cloud infrastructure services and potential increases in spending on specialized software, communications equipment, and telecom services for remote work and education, as firms encourage workers to work from home and schools move to online courses,” Forrester principal analyst Jay McBain wrote in a recent blog post.

Looking ahead

The situation around COVID-19 is fluid, so predicting how global industries will fare in the next three to six months is extremely challenging. Here’s what to watch for and think about as the global recession unfolds.

How long will the recession last?

  • JP Morgan, Morgan Stanley, Goldman Sachs and S&P Global all predict a rebound in global economic growth starting in the second half of this year, provided the worldwide infection rate slows considerably.
  • Bloomberg Economics estimates that up to 85 percent of China’s workforce had returned to work by March 13 but health experts are cautiously watching for any signs of a second virus outbreak there.

Could some sectors actually get a bit of a boost during this recession?

If there’s any economic silver lining to this situation, it’s that some industries may see a temporary uptick during this downturn. Among IBISWorld’s predictions:

  • Gold mining could gain momentum as investors flee stocks and push precious metals prices higher
  • Manufacturers of pharmaceuticals, soap, cleaning compounds and other chemical manufacturing subsets could see higher demand
  • Retailers may experience sales growth in categories like food, beverage, health and personal care items as consumers stockpile them.

As we mentioned above, there is already stronger demand for enterprise-grade collaboration platforms due to social distancing measures. In February, when IDC surveyed 32 Chinese executives in ten industries, 76 percent said they had chosen to adopt such collaboration tools during China’s novel coronavirus outbreak

What can industries and businesses do to cope?

  • Consider different sales channels: e-commerce vs. in-store sales, delivery vs. in-store shopping or sit-down dining, courses delivered online instead of in-person
  • Check for government relief programs available in their area to support businesses through the pandemic (i.e., deferred loans, interest or tax payments, emergency credit financing, opportunities for manufacturers to start making hospital equipment, etc.)
  • Assess finances with their accountants to determine how long their business can meet payroll, access inventory or supplies and pay expenses for the next few months
  • Ask their insurers if they qualify for business interruption insurance payments
  • Communicate with their employees about company policies regarding COVID-19 and continuously update them on the state of business operations
  • Find out which government programs or benefits are available to their workers during the pandemic

“Try to be as flexible as possible (with employees),” Stewart suggests. “Allow work from home as much as possible. Cut costs where possible and try to outlast the downturn.”

About Futurithmic

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