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Pandemic creating baby booms and busts – and challenges for the supply chain

ICIS, Uncategorised
By Jeremy Pafford on 31-Jul-2020

The coronavirus pandemic is amplifying birth rate trends in many parts of the world, creating via procreation (or lack thereof) challenges and opportunities to the supply chains that serve families.

Data points to increases in countries such as India and Indonesia, where birth rates already were high. Meanwhile, in Europe and the US, where birth rates have been falling for years, the trend has been exacerbated during the pandemic.

The reasons for the amplified trends differ. In India and Indonesia, tougher access to contraception due to strict lockdowns, societal beliefs about contraceptives and even supply chain issues in getting items such as birth control pills seem to have played a large role in increased pregnancies. About 25m couples in India – the world’s second most populous country – were estimated to not have access contraception during the country’s strict shutdown, according to a Dehli-based group’s calculations in May. A report in The New York Times said that some 10m couples in Indonesia – the world’s fourth most populous country – stopped using contraception in April, according to the country’s national population and family planning agency.

In the US, couples who have been trending towards waiting longer to have their first child also are saying they are hesitant to have children during times of economic uncertainty. That scenario played out following the Global Financial Crisis of 2007-2008, as US birth rates fell during that time, but were expected to rise strongly with the return of better economic times. That did not occur, possibly because of the slow nature of the economic recovery. Experts at the Brookings Institute believe that is likely to play out similarly following the pandemic due to economic concerns.

“An analysis of the Great Recession leads us to predict that women will have many fewer babies in the short term, and for some of them, a lower total number of children over their lifetimes,” the group said in a recent report in which it said it expects 300,000 to 500,000 fewer US births this year due to the pandemic.

As for Europe, what seems to be an age-old trend of declining birth rates is being made worse in these coronavirus times, as pointed out in a study by the London School of Economics and Political Science. Some 58% of UK survey respondents said they would be putting off having children due to the pandemic and its effects, with 19% saying they would give up even bearing a child. Half or more of the respondents in France, Germany and Spain said they would postpone having children.

In Europe and the US, fewer pregnancies will mean less demand for maternity wear.

These amplified trends bear watching for the consumer goods supply chain as they will affect regional demand for raw materials and end-use products in the near term (demand for baby and maternity clothing, baby foods, housing, etc), as well as have long-term ramifications (size and wealth of the consumer sector, size and skills of the labour markets). With the wealthier US and Europe getting progressively older and outnumbered by less wealthy, younger nations, they face the challenge of maintaining their GDP or vibrant hubs for economic activity. This makes thoughtful immigration vital for those regions to bring in younger workers spurred by opportunities to advance their own well-being in exchange for helping to shoulder taxation and essential labour needs for those economies.

Assumptions regarding future demand for commodity chemicals and plastics in southeast and south Asia may need to be adjusted higher to account for the baby boom underway there, and lower in the US and Europe for those regions’ baby busts. With birth rate declines correlating to economic regressions, the length of the recession/depression wrought by the coronavirus outbreak will not only need to be monitored from a near-term business prospects viewpoint, but also from a “how many more/fewer consumers will we have in the future” perspective.