Swine Flu Symptoms Affecting the US Economy?

May 6, 2009

As the swine flu virus continues to grab headlines across the nation, it’s still uncertain how wide it will spread and what impact it will have on the US economy.  One thing we can do is look at how it has affected the Mexican economy.

Swine Flu in Mexico
While it’s too early to say with any degree of certainty what effects the swine flu (H1N1 virus), will have on the economy, there is some anecdotal and common sense analysis that can take place. Time magazine, for example, has reported Mexico has taken a hit of more than $2 billion in economic losses due to the swine flu.

Many of these loses have come in the form of reduced trade and tourism, others have simply resulted from a loss of productivity as major citites shut down.  The markets in Mexico did jump 5 percent after the government announced it believed the swine flu epidemic had peaked on Monday but of course nearly all world markets gained significantly that day 5/4 , so it’s hard to say whether it was a result of a global uptick, promise of easing travel and trade restrictions, or both.

Industry Impacts
So what are the economic implications in the United States? There are certainly portions of the market that may have to deal with side effects of the swine flu, especially if the scare continues into the early summer

Already, some schools have shut down, many for a week or more at a time.  The extension of the school year to make up the lost time could impact the beginning of the busy summer travel season. Families who did plan vacations for the first portion of the summer may now find they have to either cancel or pull their children out of school and risk missing year end tests.

The flu could affect tourists coming into the US as well.  The European Union suggests Europeans postpone travel to North America. During televised remarks April 27, EU Health Commissioner Androulla Vassiliou said,

“Personally, I’d try to avoid any non-essential travel to the areas which are reported to be in the center [of the crisis].”

She followed that up by saying those in Europe “should avoid traveling to Mexico or the US, unless it’s very urgent for them.”

Thus, as with any pandemic, the travel industry looks to be one of the most vulnerable. This includes not only airlines but also resort vacation destinations, cruise lines, and theme parks.

Another area that may be affected are some of the commodities markets. If people are doing less traveling the reduced demand could add to the already existing surpluses in the oil market.  The pork industry has also been hit hard, its estimated to have lost $30 million since the swine flu outbreak began.

The Jury is Out
If you look at Delta Air Lines stock, an American carrier with a significant presence in Mexico, it’s share price is up considerably despite the swine flu outbreak.  Of course there are many things that factor into a stock’s share price but the fact that it’s going up seems to suggest Delta investors aren’t too worried about the long term effect of swine flu on the travel industry.

Of course in a global economy where international travel and trade are key to stability and growth anything that hinders them can have a far reaching affect.  The SARS outbreak made a mess in the Asian economy a few years ago so hopefully the actions of the CDC and governments around the world will contain the H1N1 virus and limit deaths and the economic impact.

Contributed by Ken Black

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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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