Realities of a Quarantine
Quarantine, or "Social Distancing", is in full swing over the past month in most countries, from Asia to America. We already discussed a few aspects of what this means, so today we will discuss the issues from a Manufacturing standpoint. Naturally when workers and various personnel are locked in their homes, the industry and the market in general are surely going to take a hit. However, we live in a day and age where we seem to be able to endure hits that would have brought other systems on their knees. Lets see.
Probably the first to get hit by this epidemic, the industrial manufacturers have to improvise or they might not survive. As Wall Street Journal reports US manufacturers have to be creative with shifts, with many "Factories staggering shifts, banning visitors and installing barriers between workers to prevent infection".
Which if you think about it, makes sense. With quarantine being in effect and most people urged to stay at home, non-essential (food, medical etc) manufacturing is going to take a hit. A very interesting article by Forbes informs us of just how serious this might be. According to the article, this pandemic could be the end of China as a manufacturing Titan. "China’s economy is getting hit much harder by the coronavirus outbreak than markets currently recognize. Wall Street appeared to be the last to realize this last week. The S&P 500 fell over 8%, the worst performing market of all the big coronavirus infected nations. Even Italy, which has over a thousand cases now, did better last week than the U.S." the article reads, and that is without even taking into consideration the heavy psychological toll on the populace, not to mention the people that lose their lives.
However the most frightening aspect of this crisis is not the short-term economic damage it is causing, but the potential long-lasting disruption to supply chains, Shehzad H. Qazi, the managing director of China Beige Book, wrote in Barron’s on Friday, as the article continues to mention.
China however is not the only one to be hit hard on the industrial side of things, as another article, this time by Axios reports "Nearly 40% of electronics manufacturers feel worse about the impact of COVID-19 on their business than they did a month ago, according to an updated survey being released later today by electronics industry trade group IPC". This matters, because modern day society is heavily reliant on trade, and with delays in manufacturing and shipments many economies will be hit.
Truly "More than two-thirds of respondents said they have been told by suppliers to expect some shipment delays, and some of the delays are growing. While on average, companies are being told to expect three-week delays, 15% said they are being quoted delays of six weeks or longer" reads the article, and with quarantines pushing to May, we might not see things getting better before July while some companies expecting a normal situation by October, while others claim its too soon to say.
Another manufacturing sector that has been hit by the pandemic is, of course, the agricultural sector. Being classified as one of the essential aspects of our society, the pandemic has put a -lot- of stress onto it.
As politico mentions in their article, "COVID-19 has sent swaths of the U.S. food system into overdrive, as manufacturers, distributors, grocers and food safety regulators try to meet demand from consumers stockpiling food and other essentials. Experts say supplies are ample and inspections are continuing as normal". As citizens stockpile food and other necessities for the quarantine and social distancing policies, the amount of food flying off the shelves is profound. But in order to sustain such a high demand, you have to ensure the supply is equally high.
"The expected bottleneck in recruitment of temporary agricultural workers arises weeks before harvest time for crops such as strawberries and lettuce that heavily depend on the foreign crews along the state’s central coast and in Salinas Valley, according to growers and labor contractors." write the Los Angeles Times. Their article however, ends with a sentiment that not many have considered during this crisis:
"Aside from the concerns about the coronavirus outbreak, growers were dealing with a more familiar uncertainty: weather. Wholesalers report that unusually heavy rains have created an “extreme” market for many produce items, including carrots, peppers, squash, potatoes and cauliflower. California’s citrus industry has had to slow or pause harvest during the prolonged rains of the last week, according to California Citrus Mutual. The industry had hoped to overcome most of the supply imbalances as it shifted production north and into additional states. Then the pandemic hit."
However, despite all the economic damages that might come from the pandemic, the Agriculture is perhaps one of the few sectors that will not be as negatively impacted as others. As a matter of fact, CNBC reports that Chinese agriculture drone makers have seen their sales rise since the pandemic.
"In the north, Beijing Yifei Technology’s Chief Marketing Officer Liu Zhuo said he expects the company’s revenue to at least quadruple this year to over 30 million yuan ($4.31 million)." the article reads.
Though one might, and justifiably so, that this might pose an issue should those drones and other similar automated equipment replace jobs that used to belong to people, the reality of the matter is that this form of progress is a good thing. In the end of the day, maintaining a steady flow of essentials to be able to meet the high demands of any form of crisis.
Effects On Economy and Tech
With the pandemic spreading its reach and all of the above sectors in jeopardy, we cannot help but talk about the effects this will have for the economy and the tech companies. Canceled conferences, restrictions in travel, and people working from home will, without a doubt, affect such companies in ways we cannot be certain for now. However, in an article by PCMag they quote "Of the 101 companies polled, 22 percent said they expect the coronavirus to result in fewer new product introductions this year. Nvidia has already lowered its revenue projections for the first quarter by $100 million, while Apple says it probably won't meet revenue guidance for the same time period".
All of the above combined may hint at a major economic issue. In this article by WeForum it informs on how the stock market is getting hit by the pandemic. "The coronavirus has created such uncertainty around the world that two of the largest single day drops in the Dow Jones Industrial Average have been from March of 2020." the article reads, and we can be certain that this is not the end.
What will this mean for the global economy when this is all over? We will have to hope for the best, and wait.
The pandemic is now in full swing, and we see the impact it has on various sections of our life already. With people locked in their houses and concerns for public health on the rise, it is not surprising to see the manufacturing industry take a serious hit.
Although modern societies do seem to have various means of adapting to any form of crisis, I do fear that the full extend of the damage done will be seen further down the line, and I can only hope that the worst has come to pass.