What would a swine flu pandemic do to the economy?
Filed under: Healthcare
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As the swine flu epidemic has moved from Mexico to Canada, the United States, New Zealand, and Spain, global financial markets are already feeling the effects of the outbreak. In the United Kingdom, several stocks have fluctuated based on speculation about the disease's effects, and American indexes started lower on flu concerns. (BloggingStocks takes a look at stocks that could be affected by the epidemic.)
At its heart, swine flu is a fairly traditional respiratory disease. It has an incubation period of one to two days, and causes fevers, lethargy, loss of appetite, coughing, runny nose and sore throat. In some cases, it can have a gastric component, leading to nausea, vomiting and diarrhea. In the past, swine flu has been passed from animal to human, but not from human to human. The current strain, however, appears to be making the human-to-human leap.
The present epidemic has infected approximately 1,300 people in Mexico, killing 81. In the United States, the outbreak has been linked to a private Catholic school in Queens, New York, where a dozen students recently took a trip to Mexico, picked up the flu, and passed it on to their classmates. Although only 20 cases have been confirmed, over 150 students are currently ill.
In the short term, the economic effect has been pretty much what one might expect. In the United Kingdom, shares of pharmaceutical companies GlaxoSmithKline (GSK), Roche, and Shire have all risen on the news that they have ample stockpiles of medication for the disease. Airlines, cruise lines, and travel companies watched their stocks tumble as it became clear that travel to Mexico will be off the table for many people, at least for the time being. Finally, companies that deal in pork production and sales also saw their prices drop.
In the United States, the market's response was not quite as clearly delineated. Standard & Poor's index dropped by 1.6 percent to 852.3, while the Dow Jones fell by 1.7 percent to 7,923, and the Nasdaq 100 tumbled 1.7 percent to 1,352. By and large, the drop seemed predicated more on a lack of overall confidence than on any sort of measured analysis.
In the short term, it seems likely that agricultural and food stocks will fall, followed by a rebound when people figure out that swine flu can't be caught from eating pork. Similarly, the bump in pharmaceutical stocks should be fairly short-lived, as the medications for treating swine flu have already been heavily stockpiled. Moreover, as the Squawk Box's Mike Huckman noted, in 2008, GlaxoSmithKline's worldwide sales of Relenza, its swine flu treatment, "were $105 million overall [...] that's lunch money for a pharmaceutical company [their] size."
On the other hand, the drop in airline and travel stocks, particularly among those companies that do a lot of business in Mexico, will probably last longer. Going into the summer, many vacationers will automatically rule out the beautiful beaches of Zihuatanejo, Cancun and Puerto Vallarta. Piled on top of a current wave of fiscal conservatism among consumers, it promises to be a hard year for the travel industry.
While long term economic predictions of a full pandemic suggest a two percent drop in global GDP, these forecasts are based on a few highly-questionable assumptions. First, they extrapolate the effects of the 2003 SARS epidemic and the 1918/1919 flu epidemic into the contemporary world. The 1918 pandemic is a problematic comparison: contemporary public health preparation is miles beyond that of a century ago, and treatments for respiratory illnesses have taken several quantum leaps in that time. Simply speaking, today's doctors know a lot more about how diseases spread, both in bodies and populations, and are much better prepared to fight them.
The 2003 SARS comparison is far more apt, although it's worth noting that the Asian flu outbreak came during an economic upswing; it's not clear whether an epidemic that occurred during a recession would be more or less damaging. On the one hand, fewer people at work would allow fewer opportunities for infection, and increased unemployment means that flu deaths would be less likely to cause production slowdowns. On the other hand, as fewer workers have health care, they would be less likely to visit doctors, resulting in higher mortality rates and more public expenditures on expensive late-term medical care.
Ultimately, the swine flu outbreak will probably result in a spike in sales of vitamins, over-the-counter cold meds, hand sanitizers and surgical masks. Businesses that disinfect outbreak sites will hire more short-term employees, as will hospitals. Perhaps, if it lasts long enough, the flu will encourage many companies to let their employees work from home, which may help increase the evidence that telecommuters can be extremely productive. Similarly, it may also restart the public conversation about properly funded public health care. In all likelihood, though, it will simply result in a lot of crowded emergency rooms and people phoning in sick.
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Reader Comments (Page 1 of 3)
4-27-2009 @ 12:59PM
Max said...
Saw a good perspective about the business implications of the swine flu here, http://www.newsy.com/videos/the_world_on_swine_flu_alert/
Looks like drug companies are benefitting and just about everything else is not.
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4-27-2009 @ 3:33PM
stensticks said...
thanks to Marxists now controlling what's left of our economy that they destroyed, what possible damage is left to be done to the economy...the pigs are in the parlour - the White House, the Congress & Judicial branches of government, and doing what they do best - spreading filth and disease and taking what does not belong to them...
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4-27-2009 @ 3:35PM
Bruce Watson said...
Stensticks-
Have you tried talking to somebody? A doctor, perhaps. Or, you know, maybe an exorcist?
4-27-2009 @ 4:03PM
red white & YOU said...
When the country seems to want NO part of the Republican Party, whats the best they can do??? Why call names of course. They have NO traction or substance! Some one should inform them that the election as well as the civil war are BOTH over and they LOST both. You don't see many liberals calling Republicans names. We know that calling them names is like calling someone with a mental handicap names, you just DON"T do that.
4-27-2009 @ 4:09PM
charles said...
yeah, obama couldn't just close the border to gun,drug and money smuggling so i guess he and mexico's president just made a sweetheart deal of some sort. he was just there, correct? another hoax for team obama. obama 20- usa 0
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4-27-2009 @ 4:09PM
racialcoward said...
Americans will be prevented from gathering in large groups like TEA PARTIES.
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4-27-2009 @ 4:10PM
Gary said...
Which SWINE are you refering to the ones in Washington D.C.?
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4-27-2009 @ 4:17PM
CHRIS said...
CAN THE U S GET THE PICTURE .. NOW SINCE IT'S BEEN PROVEN THE SWINE FLU HAS ORIGINATED IN MEXICO . NOW SHOULD THE SALE OF ANY PORK PRODUCTS BE BANNED FROM IMPORT INTO THE U S FROM MEXICO .. YES THE SWINE FLU IS WHAT IT SAYS IT IS ,,, SWINE , MEANING "PIG" "HOG" AND THE BACTERIA OR VIRAL TYPE IS FOUND TO BE CULTURE FROM THE HOGS FECES DRIED INTO A DUST FORM THEN INCUBATES IN HUMANS TO BECOME WHAT WE KNOW IT AS THE SWINE FLU .. NOW MAYBE WE NEED TO ERATICATE ALL OF THE HOGS IN MEXICO TO MAKE SURE WE WILL NOT GET CONTAMINTED MEATS INTO THE FOOD CHAIN ..
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4-27-2009 @ 4:21PM
TENCH said...
Obama still has not filled the positions of CDC Director and Secretary of Health and Human Services. Kind of tells you how he prioritizes the health of US citizens. How we will pay taxes (his #1 priority) if we are all sick or dead is something he has not thoroughly thought out. Yet in 2 days, the media will fill the internet, newspapers and all media sources about how great Obama's first 100 days were. What a crock. Wherever you go on Wednesday, be sure to pack a portable barf bucket with you in case you run in to one of these slobering political spins.
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4-27-2009 @ 4:28PM
CHRIS said...
this is another reason why we should have tighter border patrols . but when one thinks about the u s economy especially those in the pharmicudical industry are trying to find ways to make more money ... i guess they could infect a certain poulation , like those in mexico , then the pharmicudicals would begin making millions and our population would then think that it's the mexicans who are at fault ... can everyone get the picture now .. maybe our government wants to make sure the medicines they have would stop a pandemic ... it sounds like a form of bioterrism to me ...
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4-27-2009 @ 4:30PM
wshawn007 said...
It figures, more jack-asses blaming Our President. I haven't eaten pork since '87. That shit is so nasty, it's now mutated. Coupled with years of Mexican sub standard sanitation, the human and bird flu and germs from pigs mixed, then. mutated into this. Disease and cross contamination. NASTY!!! They'll never tell you not to eat pig, because it will hurt the economy. Chitterlings are pig intestines. Pepperoni is sausage and pork sausage is wrapped in pig intestines. You're pepperoni pizza is literally "chit'lin" pizza. Dominos, Pizza Hut, stop serving "chit'lins" before we all get poisoned.......
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4-27-2009 @ 4:42PM
goodangel63 said...
What is going on, regardless, the Mexican borders need to be CLOSED, between the drugs, now Swine Flu, damn it, CLOSE THE MEXICAN BORDERS.
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4-27-2009 @ 6:38PM
chayito said...
YOU PEOPLE DONT HAVE ANYTHING BETTER TO DO . MY DADDY OBAMA IS NOTHING BUT A GOOD MAN. AND IF I WERE 2 GIVE YOU FREE TICKETS 2GO 2 MEXICO YOU WOULD BE STUPID ENOUGH 2 GO.
4-27-2009 @ 4:41PM
John said...
This is a ploy to divert the American Public away from Obama’s 100 day’s of pure screw ups. He is going to go down in history as one of the worst Presidents ever. You heard it here, because you won’t hear it from the media, including the loony liberals of AOL. What a bunch of losers!
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4-27-2009 @ 5:48PM
RANDY said...
100 days and he is a screwup? remember we have to clean up the 1.2 trillion debt that was left to him. at least Obama includes the war cost.
Narrow mindedness and stupidity gets us no where. Any rich person I have ever spoken with said yu have to spend money to make money.
4-27-2009 @ 4:43PM
John said...
What happen to freedom of speech aol?
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4-27-2009 @ 4:45PM
luccassoc said...
This is a ploy to divert the American Public away from Obama’s 100 day’s of pure screw ups. He is going to go down in history as one of the worst Presidents ever. You heard it here, because you won’t hear it from the media, including the loony liberals of AOL. What a bunch of losers!
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4-28-2009 @ 4:40AM
hannahbflynn said...
Its not what will a flu outbreak to do the economy, but what the economy will do to the flu outbreak, have a look here http://twurl.cc/uq3
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4-27-2009 @ 4:54PM
Joseph said...
As always we are overplaying this swine flu. The only reason the kids in NY have what may be the swine flu is that they made a trip to Mexico. I hardly call that a pandemic.
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4-27-2009 @ 4:55PM
jay said...
CLOSE THE MEXICAN BORDER !!!!!
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