The Covid-19 pandemic has affected many lives and livelihoods significantly. In the process, it has disorganized various economic activities all over the world. Trade flows have reduced, and even though the major stakeholders are trying to get the trading industry to where it was, it is yet to completely recover. In the article below, get to learn the impact that covid 19 has had on the trading industry.
The Service Industry Was Affected More Than the Goods Trade
Even though both trades in goods and services went down, it is the service industry that was affected the most. Covid-19 led to a change in lifestyle. That means people are no longer going out as much to spas, hotels, restaurants, etc. People in the service industry were the ones affected the most, with some people losing their jobs and others closing their businesses. Even though the service industry was affected the most, the trade of goods also took a hit globally. The first half of 2020 saw the trading volumes decrease by 9.5% across the seas. At the same time, the total global trade went down by around 16 percent compared to the previous year. But despite that, the trading industry has been recovering well, all things considered. Even though the service industry is not recovering as quickly as the goods industry, stakeholders are hopeful.
There Were a Few Changes in the Most Traded Products
Various international supply chains were put under pressure in the first few months of the pandemic because of extreme demand. For instance, items like personal protective equipment were in high demand. However, other major supply chains not only remained resilient but also contributed to the recovery of the economy. For instance, the oil trade reduced less swiftly and recovered more rapidly. In the US, an average of 565 million barrels of oil are extracted every year through offshore drilling. While the pandemic slowed down production, this is a sector that managed to bounce back quickly.
Certain Sectors Experienced Growth
While some sectors were affected significantly, with some shutting down, others did well. When people were asked to stay at home, millions started working from home while shopping and socializing online. While online shopping had been projected to reach about 24% by 2020, it managed to get to 33% by July 2020. Other sectors also gained where there was an increase in the sales of white goods. This was especially true for products associated with hygiene and health, such as steam washers.
Global Production Was Slashed
During the first few months of 2020, global manufacturing fell by about 6% compared to the same period the previous year. It was even worse in the second quarter, where it went down by 11%. This was the biggest fall ever experienced in the world of manufacturing since the 2008/9 global financial crisis. Not only did this lead to job losses but huge financial losses. It is estimated that, on average, one hour of downtime in a manufacturing plant costs about $260,000. When production stopped for different products, the financial losses were significant. Even though the production of essential goods was not affected as much, in the first quarter of 2020, such industries still took a hit. Other sectors that also experienced a significant decline in production include machinery and equipment, motor vehicles, and apparel.
Reliance on Technology
Everyone can agree that Covid has cemented people’s reliance on technology. Electronic and financial trading has entered a new era where companies with no technological infrastructure in place are bound to lose. It is also important for firms not to over-rely on third-party IT assistance. Manufacturers need to take time and invest in in-house IT teams. On top of that, making sure that the IT department is constantly updated on current trends will go a long way. With that said, it is also important to anticipate the future. If there is something that Covid 19 showed, it is that you cannot predict the future. Having flexible technology and adapting to emerging issues will help the trading industry keep improving.
Even as the threat of the pandemic seems to be decreasing every day, the main stakeholder in the trading industry needs to take note of the lessons learned. In addition, learning to adjust to emerging circumstances quickly will help reduce financial losses.
