The tremendous impact of the COVID-19 pandemic has led to a massive onslaught of company spending as various industries have seen the most highs and lows since the 1920s. Before the pandemic, economists worldwide pointed to the possibility of a recession in the last quarter of 2020. While they might have felt vindicated when the pandemic came into the scene, the truth is that COVID-19 is possibly going to be the deepest recession since the second world war.
In what was termed as a “weak momentum” and “stunted growth” by The Wall Street, The US economy was forecast to shrink by 6.1%, Netherlands, 4.1%, Japan, 6.1% and Europe, 9.1%. “Like all past recessions, measures taken by The Dutch Government would cushion industries and reshape them to the new normal,” says Agnes van Emmerik, the editor for adviesjagers. “To respond to the economic shock that has affected their company, tough times like these call for rational business decisions.”
Industries That Thrive in A Recession
Tough economic downturns and consumer trends present companies with tough fiscal and operational decisions. Given that not all businesses suffer from downturns as severely as their counterparts, they may likely not be forced to cut down expenses, minimize purchases and costs. However, unlike the economic downturns of the 1980s and 1990s that unscathed industries typically identified as recession-proof, COVID-19 has caused a massive shock in the supply chain. A good indicator is the disparity of capital expenditure and consumer spending in the pre and post-COVID context.
According to a content strategist working for The INSC Magazine, industries that perform well in a recession tend to supply staple items that center around people feeling “secure.” When income is reduced in a downturn, its abrupt nature and stay-at-home rules make people focus more on bare necessities. From food and drug retailers to personal goods, medicine, gas and water, mobile, electronics and electric equipment, these unscathed industries had a percentage change in share price ranging between 10 and 20%. Based on companies’ resilience in past recessions, the crucial traits of a recession-proof industry are a focus on all stakeholders, a culture of innovation, authenticity, clear financial strategy and an ambitious approach.
The Future of Recession-Proof Industries
A business should either provide priority items for a frugal consumer to buy or those whose demand will rise even through tough conditions. From the performance of different companies in the 2008-09 recession, the behavior of recession-proof industries establishes the critical reasons behind consumer sustenance in consumption. Based on a publication by NHS, an adult man would require 2,500 calories to sustain their health, which certainly doesn’t change in a recession. This is the top reason companies that provide the basic staples of a diet will not be disrupted in an economic downturn. At the same time, businesses that focus on medicine provisions tend to have uninterrupted cash flow as health continues to be a spending priority over everything else.
While the piping infrastructure for essential commodities like gas, water and sewer lines may not be the most lucrative business ideas one could think of, they can weather any storm given that their consumption remains pretty unchanged. From a commercial perspective, the post-COVID context of the blend of industries may not change adversely. It is, however, possible that new industries will emerge as investors capitalize on new consumer prospects.