While the size and persistence of COVID-19’s global economic impact is unknowable, Central Florida will directly experience the effects of slowed consumer demand.
During these uncertain times, the Orlando Economic Partnership’s top priority is to keep the business community informed and prepared. This is the first installment in what will become a series of articles designed to help the Orlando region understand what is happening to our economy. Our goal is to be a one-stop-shop to answer the question, “what does this mean?”
Our lines of communication are open, and we are engaged in the need to seriously and truthfully confront the facts. If you have another way to help, we want to hear from you. Please email
BusinessHelp@orlando.org to share a solution or provide context on some of the many issues we seek to address.
The Economic Impact of COVID-19
1. How is COVID-19 impacting the economy?
COVID-19 represents significant and growing shocks to the global economy on three simultaneous fronts: supply, demand and financial markets. “Supply side” impacts include shutting down production and services provision in the face of quarantines or reduced labor pools fighting the illness. “Demand side” shocks are reflected by slowed or postponed spending ranging from cancelled vacations to new furniture or house purchases. The 21 percent drop in the Dow Jones Industrial Average from February 19 to March 13 illustrates the shock to the financial markets.
Another important dimension is the global scope of the impact particularly on the G7 nations who account for 60 percent of the world supply and demand and 65 percent of world manufacturing. The interconnectedness of global supply chains means that COVID-19 can be expected to impact nearly all countries.
2. What is the projected economic impact?
The size and persistence of the economic impact is unknowable. Such calculations can be made by modeling different scenarios that make assumptions about the rate of transmission and lethality.
3. What is Florida’s exposure to economic slowdown?
Florida will certainly feel the impact of slowed consumer demand. When consumers get nervous about the future, they are more reluctant to open their wallets. In turn, reduced spending shrinks profits and reduces tax receipts that sustain payrolls and public services.
The Florida Department of Revenue’s Tax Handbook reveals that sales taxes generated 77 percent of the state’s general revenue in the budget year 2018-2019.
4. What is Central Florida’s exposure to economic slowdown?
Data for the Orlando metropolitan statistical area (i.e., Lake, Seminole, Orange and Osceola counties) underscores similar dependence on consumer spending at the regional level. More than 78 percent of all economic activity is linked to spending in three categories: tourism and recreation (41.8 percent), consumer non-durables (21.4 percent) and business investment (14.9 percent).
5. What can be done to mitigate economic impact?
Acknowledging that not all industry sectors will be impacted in the same way, the extent of national and regional impact will depend on several factors:
- Efficacy in treatment (i.e., “flattening the curve”)
- Rapid development of a vaccine
- Facilitating an accelerated return to the new normal.
Additionally, controlling the psychological impact of the crisis will depend on transparency and honest government communication to preserve or build confidence to the greatest degree possible. Spending (demand side) will be much slower to return should the market lose confidence in institutional preparedness and response in anticipation of a future crisis.
6. How can economic impacts be tracked?
The impacts of corona virus on the economy will not appear in official data sources for some time. For example, the monthly jobs report produced by the Florida Department of Economic Opportunity will not release preliminary job counts for March until April 17. Data on home sales and Gross Domestic Product (GDP) also take months to realize from the time of impact. High-frequency indicators worth watching, however, include movie box office sales, hotel vacancy rates, and claims for unemployment insurance. These indicators will help judge the trajectory of the broader U.S. economy as consumers either return to normal behavior of stay home out of fear.
Orlando is a resilient community and we have faced many challenges in the past. By uniting against COVID-19, we can flatten the curve of cases in our community and avoid the devastating consequences that come with loss of life and livelihood. For detailed information and resources for your business’ response to COVID-19, please visit Online Business Resource Center at Orlando.org/covid19
