Recession: Industry Impact

Recession prospect is certainly very scary. World over economies are contracting. The recession has had a significant impact on the global economy, leading to decreased GDP growth and an uncertain future for many industries. The IMF cut its forecast of global GDP for the year to 2.7% and for the US GDP growth forecast is 1.4% .China and India are key players for the world’s supply-chain requirement. Post COVID pandemic China is still struggling to provide supply-chain needs to the world and India is still in process to build supply-chain needs. Escalating Russia-Ukraine war and geopolitical tension is disrupting the world’s supply-chain. 

Due to all these issues,Inflation is very high across the world. The inflation rate depends on the balance between aggregate supply and aggregate demand within the economy. US inflation consumer prices rose 7% approx. in December 2022 from a year ago. Inflation driving up vendor price beyond budget expectation. The US Federal Reserve is increasing interest rates in the most aggressive way to curb this inflation. 

No industry is completely insulated from a recession, there are always opportunities within even the most impacted industries. The Impact of recession  is not equal for all kinds of industries. Most impacted industries are directly proportional to consumer sentiment, consumer basic requirement and consumer spending. Least impacted industries are not directly proportion to user sentiment and it is also supported by external system.

Here is worldwide recession industry impact index

In the above chart, most impact industries are consumer, consumer services and transportation. After COVID-19 this industry is cautiously optimistic about the return of travel and tourism. But  inflation and a volatile market are pulling these industries down. Loyalty programs are weakening between brand and customer. Recession industry impact index is average 8.5/10 approx. Hospitality and Airlines industries are trying to optimize their process to mitigate their risk. They are cutting routes, reducing flights, and, in some cases, shutting down offices to help reduce expenditures.

Retail and Manufacturing industries and also getting impacted with current inflation and escalating geopolitical tension. Clearly the industry has experienced unprecedented supply chain pressures and disruptions over the past two years; Global disruptions – such as the Russia / Ukraine war – continue to impact manufacturing supply chains, thereby increasing costs and delays. Recession industry impact index for this industry is 7.5/10 approx. Retail and Manufacturing industries are working on omni-channel commerce platforms, optimized operations, and omni-channel order orchestration and fulfillment to mitigate their risk. They are reducing overhead cost and going for digital.

The Federal/Central Government is the most recession proof industry. It needs to make ongoing investment to keep the country running. Critical infrastructure management, border, customs and immigration management are key activities the government can not ignore and reduce investment. Even in COVID-19 pandemic time influx of federal funding and ample emergency funds put state and local entities in recession-ready shape. Recession industry impact index for this industry is 1/10 approx.