Shape of Recovery

For the components industry to stage a recovery, a focused stimulus will ensure its not left alone to fight the demon.

The world has moved on from predicting the Covid-19 recession to predicting the recovery shape. Will the shape of the recovery curve be ‘L’, ‘U’, ‘V’, ‘W’, ‘Z’ or as some say the ‘Nike Swoosh’? In the early stages of predictions, you must have come across the ‘V’ shape. Touted as the best-case scenario, it signals a quick bounceback from the slump. On the other end of the spectrum is the ‘Nike swoosh’ where all hands point in the direction of quick surge at the end of the lockdown only to be blunted from thereon. For a ‘Z’ shaped recovery, the assumption is that people at the end of the lockdown would be in a celebratory mode and end up spending all the money held on to during the lockdown. This is expected to result in a brief boom. Post it, the GDP could settle down at the pre-pandemic levels. The ‘U’ shape recovery resembles a sharp dip before a slow and gradual recovery expected to last over many quarters. It is based on the assumption that the vaccine will be found only in 2021. The ‘L’ shaped recovery signals permanent damage to the GDP taking it down to levels lower than estimated. The ‘W’ or double-dip recession hints at a difficult journey till the time the vaccine is found. With the latter, one can’t rule out new waves of infections bringing with it more uncertainty and the need to impose more lockdowns. It’s a rare occurrence though. For the components industry to stage a recovery, a focused stimulus will ensure its not left alone to fight the demon.