“The more we are locking down, the more we are slowing the spread. The other side to that is that it prolongs the extent of the economic shutdown.” Phillip Coorey, AFR

Not unexpectedly, social distancing and ‘stay-at-home’ orders have led to a dramatic reduction in Australia’s retail activity. Today’s chart from UBS reveals the extent of that collapse with foot traffic (from ShopperTrak) down 70% relative to two months ago). A large swathe of Australian retailers—most of which function on relatively tight margins—have shut their doors with the intention of hibernating through this period. According to the Australian Bureau of Statistics, retail is Australia’s second largest employer with around one-third of workers between 15-24 years old.

It is too early to tell when the Government will assess it is time to lift the stay-at-home order (though last week’s news that New South Wales’s lockdown laws will be enforce for at least 90 days is a signal of sorts). Tomorrow (Tuesday 7 April) Prime Minister Morrison is expected to release the latest modelling of how the virus outbreak may play out, and he hinted last week that it will be a better outlook than he released mid-March. For the optimists, this could suggest a rise in foot traffic for retailers (and repair of likely much higher unemployment by then) through Q3 this year.

As Bank Credit Analyst Research noted today, “While lockdowns clearly have an extremely negative initial effect on economic activity, there appears to be an inverse relationship between their severity and duration…investors and economic agents fully recognise that a recession is occurring because of the deliberate actions of policymakers. Thus, they may be less inclined to extrapolate (i.e. severe second round effects), meaning that demand may recover faster than usual once activity resumes.”

Foot traffic falls for Australian retailers

Source: ShopperTrak, UBS.

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