Experiential Wealth, Inc.
Experiential Wealth, Inc.
Experiential Wealth, Inc.

The COVID Effect on Supply and Demand

Feb 23, 2023 | Individuals, Institutions, Plan Sponsors, Quarterly Commentary

Much has been written about the COVID experience from a medical health standpoint. Let’s talk about the impact on the economy.

COVID was first recorded in Wuhan, China. Wuhan is a factory floor for many things that get manufactured as part of the global supply, so immediately that impacts the supply chain.

As COVID started spreading to other places worldwide we realized that, hey, this may happen to us, so we start shutting down our economy. When we shut down our economy, what happens? We have demand shock because people are not making any money. First, supply dropped off and then demand dropped off, but the government was issuing a series of checks to help support individuals and families.

Additionally, PPE loans allowed people to still get paid so everything is kind of back to normal from the income standpoint. But we were instructed to shelter in place and not go anywhere. What do we do? We start shopping online! This increases demand, but the supply is still restrained in many ways.

With many people in different countries getting sick from COVID, transportation was also impacted. The trains are not running, the truckers are not driving, the warehouse people are not working, and the ports are closed. It was a chain reaction. As a result, even if we can get the stuff to our shores, it’s not getting to us.

At the end of 2020, COVID vaccines were approved and being administered. The lockdown has been lifted and more people start to go out to spend money. What economic impacts did this have?

  • People are working from home so many people are moving to places they like to live.
  • People want experiences so they stopped buying stationary bikes and wanted real bikes.
  • Demand is more on services than goods.
  • Adequate staffing became an issue in the hospitality industry.

China has been on a on a zero COVID policy for three years. They have closed cities and factories from time to time, which also hurt the supply chain. It has been a rollercoaster because of unpredictability.

I hope the worst is behind us, but the recovery is not perfect. It’s like a domino effect. You push one domino and everything else falls. That was the shutdown. To reopen is not to take the last domino and push up and all the other dominoes will stand up again. Each domino piece must be stood up by itself, and that takes time. And it’s not a sequential, as we would like it.