Lodging and leisure and non-food retail sectors would be among the hardest hit if coronavirus lockdowns continue or are reinstated due to future infection spikes, according to a new Fitch Ratings heat map.
Commodity, airline and gaming industries would also suffer the greatest impacts if a meaningful economic recovery is delayed beyond 2021, the report concluded.
Fitch's baseline assumption is that the economy will begin to improve in the third quarter "after a short but severe global recession." A "downside" scenario assumes COVID-19 flare-ups and renewed stay-at-home orders that could push recovery to pre-pandemic levels to around the middle of the decade. Other worst-case assumptions include sharper economic contractions in the US and Europe, double-dip slowdowns in China and East Asia, wage declines and job losses across income brackets, prolonged downturns in financial markets and a collapse in demand for oil.
"Most retailers' revenue and profitability have already been severely hurt by the pandemic this year due to store closures while bankruptcy risk is rising," Fitch analysts wrote. "Renewed lockdowns could result in mandated or voluntary re-closing of stores that have gradually reopened and restricted mall activity."
A rise in COVID-19 cases would also disrupt travel again, hurting travel services, theme parks, cruises and associated lodging, the report concluded.
While the heat map does not predict any sector would go unaffected by a downside scenario, some industries would fare better than others. Food retail, utilities, food, beverage and tobacco, healthcare and pharmaceuticals and telecommunications sectors would endure mild or moderate impacts in a significant downturn, the report projected.
About 38% of Fitch-rated issuers—the biggest share of the heat map—should expect medium to high impacts in a downside scenario, analysts wrote. Sectors in that category are ground transportation, auto and auto-related, engineering and construction, other manufacturing, commercial real estate, media and entertainment, business services, and homebuilding.
A smaller group—14% of Fitch-rated issuers—of technology, consumer and aerospace and defense should anticipate a medium range of impacts should lockdowns resume, the report said.
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Cheryl Miller
Cheryl Miller, based in Sacramento, covers the state legislature and emerging industries, including autonomous vehicles and marijuana. She authors the weekly cannabis newsletter Higher Law. Contact her at [email protected]. On Twitter: @CapitalAccounts
