It’s all bad news about the economy right now. We’ve heard that quarter 2 GDP could be down by 35% and that unemployment is already up by 1.4m. Feeds are full of dire comparisons between the economy now and in previous recessions. Every day there’s a new chart showing an important indicator heading due south at alarming speed.
It’s frightening, but these developments in the economy are not unexpected. As soon as the government made the decision to enforce lockdowns, they made the decision that the economy would shrink.
By definition, if businesses are closed, and people can’t buy things that involve leaving the house, a large proportion of economic activity stops. Lockdowns were always going to produce these changes in economic indicators.
Now that many marketers have their immediate response to lockdowns sorted, it’s time to focus on what’s likely to happen next. On this, three forecasts by reputable economists – from the International Monetary Fund, the Office of Budget Responsibility and a selection of experts quoted by Bloomberg – agree. They all expect a bounceback driven by pent-up demand that will see the economy back to where it was in 2019 by the end of next year or early 2022.
If the economists are right about the bounceback, now is the time for marketers to start planning for it.
These are optimistic scenarios, but they could happen. As the Harvard Business Review notes, economies had this steep decline followed by fast recovery during SARS in 2002, Hong Kong Flu in 1968, H2N2 Asian Flu in 1958 and Spanish Flu in 1918.
And there is evidence of pent-up demand already. Take Next, for example. It is a good barometer, because it is often one of the biggest retailers in the shopping centre, and its market is ordinary families – everyone really. It recently had to close its website because it was overwhelmed with orders.
Going against pessimism
Of course, there are downside risks. The longer lockdowns go on, the more things will happen that have lasting detrimental effects on the economy.
These could include firms like Debenhams, which already had a shaky balance sheet, closing for good. Others might not close, but scale down and permanently part company with employees. In places, government packages to save jobs might not work, or be enough.
If permanent effects mount up, the recession won’t disappear when lockdowns end and we’ll see a slower, weaker economic recovery.
But if the economists are right about the bounceback, now is the time for marketers to start planning for it.
The data suggests that we are past the peak of Covid-19. Deaths from the disease have stopped increasing and are now consistently falling.
Marketers’ response to lockdowns so far has generally been to pull spend and pause marketing. With an overwhelmingly pessimistic view of the economic outlook in the media, some might be tempted to stop for longer.
Of course, the advice has to be different for different advertisers in different categories: a bounceback is no use for firms with supply chains in disarray, or for product categories where purchases can’t be delayed.
But for many marketers a bounce back in demand is a golden opportunity, not just for sales, but to be part of a nationwide sigh of relief.
Grace Kite is managing director at Gracious Economics