Swine Flu Can Threaten Our Weak Economy

The U.S. economy was showing signs of a recovery that is until we were faced with a

potential new threat, the swine flu. Swine flu is a type of influenza virus present in pigs, and can present itself among people who work and live closely with pigs. Swine flu is on the rise in Mexico and has already showed its way in the U.S. just across the border. It has already killed 80 people and has made hundreds ill. . Some have concluded that a widespread outbreak could batter the tourism, food and transportation industries in particular, deepening the recession in the United States and possibly worldwide.

The Congressional Budget Office estimated that a severe flu pandemic could infect 90 million people, result in the death of more than 2 million and would cause a 4.25 percent drop in the nation’s gross domestic product. A milder pandemic, similar to those in 1957 and 1968, could lead to 75 million people becoming sick, 100,000 deaths and a drop of 1 percent in the nation’s GDP. (*Info)

The CBO economic estimate is conservative compared with those of other economists who forecast the nation’s GDP could decline by as much as 6 percent. The International Monetary Fund warned that the fallout from a pandemic could expose some “financially vulnerable enterprises to the risk of bankruptcy.”
People may begin to fear being around others who could be sick. In order to prevent people from becoming ill, they are going to avoid going to public gatherings, such as shopping malls, movie theatres, concerts, restaurants, sports events, and even schools may be closed. Businesses will also result in lost productivity because they will experience high absentee rates due to the fact that people will choose to stay home to prevent becoming ill.

Besides consumers, the swine flu is also affecting businesses. Industries involved in pork production and hog producing are suffering in the effects of the current swine flu epidemic. Recently, shares of Smithfield Foods Inc., the nation’s largest pork processor, fell more than 12 percent in stocks. The swine flu outbreak is expected to hurt the $5 billion export market U.S. pork market, and China, Russia, and Ukraine have already made the decision to ban the importing of pork products from Mexico and the three U.S. states infected. Other nation’s governments have only increased the screening process of pork imports.

However, analysts are expecting consumers to shy away from eating pork, and increase the consumption of other meats, like chicken or beef. “Though there is no evidence that swine flu can be obtained by eating pork, the fear generated by a disease named after hogs cannot be good for pork consumption,” said JP Morgan analyst Ken Goldman.

The CBO estimated that a flu pandemic modeled on the severity of the 1918 outbreak could result in the following: • 80% drop in demand for arts, entertainment, recreation, accommodation and food services. • 67% drop in demand for transportation and warehousing. • 10% loss of demand for agriculture, mining, construction, retail trade, finance. • 15% increase in demand for health care and social assistance.

Some experts, however, disagree with the health care figure. They believe health care could impact negatively as people cut back on spending like regular doctor visits, especially if patients decided to stay home to recover. Also, health care systems could lose money from the treating the under-insured and uninsured.

The flu could hurt the $5 billion export market for U.S. pork. China, Russia and Ukraine banned imports of pork and pork products from Mexico and three U.S. states that have reported cases of swine flu, and other governments were increasing screening of pork imports.

Shares of Smithfield Foods Inc., the nation’s largest hog producer and pork processor, fell more than 12 percent.

Even though it’s safe to eat pork (swine flu viruses don’t spread through food), analysts still fear that consumers could shy away from eating pork and shift to other meats like chicken or beef.