The Economy Under COVID-19: Notes From the Trenches

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

Retail sales by some U.S. shopkeepers in March were prodigiously bad. The revenue rung up by clothing and accessory stores was only half February’s level. Versus the month prior, motor vehicle and parts dealers and furniture stores had their earnings slashed by one-quarter. Moving in the opposite direction, though, were grocery stores, where sales soared by more than a quarter. Rumors of shortages prompted panic buying.

The first wave of giant job losses in the U.S. (and Canada) occurred in the leisure and hospitality sector. Now it’s being reported that sales by U.S. ‘food services and drinking places’ (i.e., bars and restaurants), were -23% in March compared with February.

The share of U.S. oil imports supplied by Canada has risen from 25% in 2000 to over 60% in early 2020. There’s currently a recession underway and U.S. total demand for oil is on the decline. While fewer imported barrels will be needed, the supply from Canada should hold up relatively well, because delivery through pipelines is easy and the price of WCS oil is even cheaper than WTI oil (i.e., Western Canadian Select versus West Texas Intermediate). Canada’s share of U.S. oil imports could increase to 70% or 80%.

An increasing share of U.S. oil imports won’t mean a lot to Canadian producers, though, if the number of barrels they ship falls. What everyone working in the industry would like to see is an increase in price. To achieve that end, Russia and Saudi Arabia and some other oil producers have come to an agreement to significantly lower output levels.

A social diversion that may warrant a comeback is a night out at a drive-in movie theater, although there aren’t many still in existence. At least, it will scoot you out of the house. Be prepared for some rules, though: there can be only two people per vehicle and they must promise to snuggle. (Sounds like a line I might have tried in my younger heyday.) You must also swear to stay in your car and have your snacks delivered during the double feature intermission and that you will sing along with the dancing hot dogs on screen.

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – April 20, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.