declined by over 7% and trading on the NYSE was temporarily halted. The growing uncertainty and impact of the coronavirus on global economies was evident once again. The S&P 500 finished the month with a -12.51% return. Consumer spending accounts for approximately two-thirds of U.S. GDP growth and growth in consumer spending fueled the recent economic expansion. Any event that reduced that spending would derail the economic growth. The coronavirus would change consumer spending quickly and significantly. As the virus spread in March and stay- at-home orders became all too familiar, a service-sector economy would be significantly impacted and quickly. That’s pretty much what the financial markets were forecasting; and that is exactly what happened when the U.S. Department of Labor announced that initial jobless claims exploded to a seasonally adjusted 3.28 million in the week ended March 21 up from the prior week claims of only 282,000. Unemployment claims doubled the following week to 6.65 million. While some leaders may have doubted the economic and healthcare impact of the coronavirus, the financial markets said otherwise. The stock markets reflected the growing concern and expected economic impact on corporate profits around the world. The U.S. stock market was a precursor to what would happen in the U.S. labor market.
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What Will Change: Supply Chains
The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and China. In 2019 the U.S.-China Economic and Security Review Commission held a hearing on the growing reliance of the United States on China’s pharmaceutical products. Important points from that hearing were summarized by the Council on Foreign Relations, an independent nonpartisan think tank that analyzes foreign policy issues. Key points included: • Chinese pharmaceutical firms have captured 97 percent of the U.S. market for antibiotics. • More than 90 percent of the market for vitamin C is imported from China. • In 2018, 95 percent of ibuprofen, 91 percent of hydrocortisone, 70 percent of acetaminophen, and 40–45 percent of heparin used in the U.S. came from China, according to the U.S. Commerce Department. • In addition, many over the counter and other generic drugs sold in the U.S. are sourced from China, including antidepressants, HIV/AIDS medications, birth control pills, chemotherapy treatments, and medicines for Alzheimer’s disease, diabetes, epilepsy, and Parkinson’s disease. • Key drug imports from India include antibiotics, painkillers, hormones, antiviral drugs, and vitamins B1, B6 and B12. Speaking of sourcing from China, ventilators were needed and in short supply as the coronavirus took hold in the United States. China became increasingly important as a supply source for ventilators. China is also the world’s largest producer of medical face masks. According to the BBC, normally China produces around twenty million masks each day, which is estimated to be around half of all masks made globally. Going forward, the supply chain of medical products and pharmaceuticals will likely (and should) change as a result of the coronavirus. The extreme dependence on China for antibiotics, select drugs, and medical products can be problematic on multiple fronts. First, heavy reliance on sourcing from a single country, no matter which country, is problematic if that supply chain is broken due to a pandemic or natural disaster. Second, heavy reliance on sourcing from a country which has been the focus of a trade war with the United States can create problems, particularly when products sourced are needed medicines and medical supplies. That being said, there are reasons why the supply chains were established the way they were. Usually cost plays a big factor. Changing the supply chains to include more U.S. and near-shore sourcing could impact costs – and consequently prices. Nonetheless, sourcing needs to and likely will change. Multiple options for product sourcing and multiple country options for sourcing can lessen the probability that disruptions to supply chains will occur, no matter where the next pandemic or natural disaster originates. It would also provide a quicker response to any national
Center for Business and Economic Insight - CBEI EXTRA!
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