Flattening the economic loss curve

No one can predict how long the COVID-19 pandemic will last, but a huge focus on social and physical distancing has been effective, at least in part, to “flattening the curve” of infection and critical illness.

Tracking on an inverse curve is the local and global economy. Right now uncertainty, social distancing, and shuttered businesses and trade have tanked the economy. Governments are working at rolling out support payments and stimulus packages, while the Bank of Canada and U.S. Treasury cut rates.

Farm Credit Canada’s chief economist, J.P. Gervais, says that the economy was already pulling back at the end of 2019, but that we’ll likely end up down four to five per cent for the first quarter of 2020, on an annual basis.

We’re not just experiencing economic carnage, there’s demand destruction occurring, too — and it’s very difficult for value chains to adapt in the short term, and there are even bigger unknowns as to what demand levels look like on the other side of this. As an example, dairy farmers in Canada and the U.S. have been ordered to dump milk this week, and cattle prices are in the tank as high value cuts can’t find homes.

Gervais says that it’s unlikely we’ll see a straight-up recovery curve. Instead, we’re likely looking at a U — with slow rise back to whatever the new normal may be. Either way, it’s too soon to know exactly what that looks like or when to expect it to begin.

Listen below to the full discussion with J.P. Gervais, including a discussion on interest rates, too: 

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