The share market recovery has stalled as Victoria reintroduces lockdowns to combat a new resurgence of the coronavirus outbreak. Businesses are now facing shutting up shop not long after reopening, casting doubt on economic recovery. The impacts of the coronavirus crisis on our lives and spending are becoming entrenched as we work, eat, and spend more leisure time at home.
Consumption patterns are likely to be impacted over the long term as new habits are formed. This will have a mixed impact on ASX shares, with some set to benefit while others will continue to experience challenges. According to the most recent Deloitte Access Economics Business Outlook, the mining sector has continued largely unabated through the crisis, with resurgent demand from China driving iron ore and coal sales.
This has benefitted companies such as BHP Group Ltd (ASX: BHP), whose production guidance for 2020 remains unchanged for petroleum, iron ore, and metallurgical coal. Rio Tinto Limited (ASX: RIO) actually reported an increase in iron ore shipments in the March quarter, with shipments up 5% compared to the prior corresponding period.
But the news is less positive in other parts of the economy, such as the tourism industry. With international travel off the cards and domestic travel severely curtailed, companies like Qantas Airways Limited (ASX: QAN), Flight Centre Travel Group Ltd (ASX: FLT), and Webjet Limited (ASX: WEB) are in limbo.
In retail, fortunes have been mixed. Consumers are increasingly turning to e-commerce to fulfil their needs. Those with a strong online presence have reported surging digital sales. Those that rely on a physical presence have been more adversely impacted due to store closures. Accent Group Ltd (ASX: AX1) reported a quadrupling of online sales when stores closed. Adairs Ltd (ASX: ADH) saw online sales increase 92.6% over the half year to 14 June and 64% over the year to date.
Pre-COVID-19, strong overseas population growth, international travellers, and students provided stimulus to many industries. This source of growth has now been cut off, and it's not clear when it will resume. As Deloitte notes, this hurts education and tourism immediately, but also has downstream impacts. It may weigh on economic recovery, impacting on everything from construction to utilities.
Foolish takeaway
The medium- to long-term impacts of the pandemic will be mixed, favouring some ASX shares over others. Changes to consumer behaviour resulting from the pandemic may alter spending patterns over the long term.
