Instead of a ‘V’ or ‘U,’ Many Expect a ‘Swoosh’ Shaped Recovery
May 13, 2020
Many investors and corporate executives were hoping that the recovery from the economic fallout of coronavirus would be V-shaped, meaning a sharp decline followed by a quick bounce back. However, concerns about the severity of the economic slowdown and complications around lifting the lockdown have more business leaders anticipating a “swoosh” shaped recovery.
The term refers to the Nike logo and describes a recovery that falls between the V-shape and a U-shape, where the recovery is more gradual and takes longer.
The Wall Street Journal spoke to several economists and corporate executives who now say that economies, especially in the west, will not recover for many months, or perhaps even years. Most agree that many businesses will not see a return to their 2019 levels until next year.
The reason for the more pessimistic outlook is that lifting the lockdowns has proven to be a more gradual process. States that have reopened have kept social distancing guidelines in place, limiting the number of customers who can be in a store or restaurant. Larger gatherings like concerts and theatres are still barred and may be for the foreseeable future.
Consumer sentiment also plays an important role. Surveys have found that many Americans will be hesitant to return to life as normal, avoiding shopping malls and canceling travel plans, even after restrictions are lifted. Consumers are also saving more and spending less.
Initial data from China has further tempered expectations. The majority of the country’s business have resumed normal operations, but are operating at only 50-70% of capacity. A lack of demand both domestically and abroad has put deflationary pressure on manufacturing.