Coronavirus pandemic, its timing, may prove a double-whammy to Kansas City economy
Not that there’s ever a good time for a pandemic, but the coronavirus outbreak hits Kansas City’s economy at a particularly sensitive time.
For one thing, the pandemic’s disruption in the global supply chain is occurring just as manufacturers in the region were seeing modest expansion in February. COVID-19, the strain of coronoavirus responsible for the current outbreak, began its spread in China, a key exporter to the United States.
For another, it wiped out the Big 12 Conference men’s and women’s basketball tournaments, a time when retail and tourism-related businesses count on significant consumer spending.
Those factors, as well as days of nose dives in the stock market, figure to challenge Kansas City’s economy. To what degree depends on how long the spread and the consequences of the coronavirus last.
“I think the biggest issue for Kansas City is still supply chain,” said Chris Kuehl, an economist with Armada Inc. “We have a lot of manufacturers here who are struggling to get the parts that they need.”
On Feb. 27, the Federal Reserve Bank in Kansas City released its manufacturing survey, which found that manufacturing activity in the central bank’s Tenth District reached positive territory for the first time in eight months.
“Regional factory activity finally expanded again in February,” said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, in a press release at the time. “This was despite over 40 percent of firms reporting some negative effect from the spread of coronavirus so far in 2020.”
That was before the scale of the pandemic became apparent in the United States this week, which led to sports leagues, conventions and other public gatherings canceling their events.
How bad can it get?
Kansas City, it’s often said, is less susceptible to the booms and busts of the national economy when compared to major cities on the coasts.
Tim Cowden, president and chief executive of the Kansas City Area Development Council, said the current situation is changing so quickly that it’s too soon for his organization to see any impact. The KCADC helps attract and expand businesses and industry to the Kansas City region.
“With regards to impact on our current discussions with companies evaluating the KC region for relocation or expansion, we have not experienced a slow down or postponement in decision timelines or new project flow yet,” Cowden said in a text message. “But, the macroeconomic situation is changing so rapidly that I expect it will take some time for our team to see any impacts.”
Still, Kansas City’s retail and hospitality sector will undoubtedly take its lumps from the cancellation of the Big 12 Conference basketball tournament. Visitors expecting to pay money to get into arenas to watch college basketball, eat at local restaurants and stay in hotels are likely headed home, spending less than they had anticipated.
“That’s going to be a huge impact and that just ripples throughout the economy,” said Jeff Pinkerton, senior researcher for the Mid-America Regional Council.
Restaurant owners and trade associations have told The Star they have not immediately started seeing the impact. But they figure they will.
“That’s got to have an impact, at least based on expectations of the Big 12 tournament in town,” said Bill Teel, president of the Greater Kansas City Chapter of the Missouri Restaurant Association. “Restaurants were going to be busy. That’s going to affect them in a negative way.”
Stocks tumble
This last week with its almost daily tumbles of stock indices has taken on the feeling of the last major stock market crash in 2008, which led to the Great Recession.
One potential difference this year: The market may rebound more quickly than 12 years ago if governments can get the spread of the coronavirus under control.
“2008 was an endemic problem in the financial sector: The banks blew up ... people couldn’t get credit,” Kuehl said. “That was a legitimate economic crisis brought on by bad decision making in the financial world and recovery was very slow. The good news with this one is that it is not an economic issue, it’s a health issue causing an economic issue.”
Even so, twice this week trading on Wall Street has been suspended temporarily after markets fell precipitously. Turmoil in the stock market has dragged down share prices of many of Kansas City’s publicly traded companies.
AMC Entertainment has taken a drubbing on Wall Street as investors figure that consumers may avoid large gathering areas like the movie theaters that AMC operates. AMC’s stock was trading at $2.90 a share during midday trading on Thursday, a 20% drop from the day’s opening price. AMC shares were trading at $7.76 on Feb. 20.
EPR Properties, a Kansas City-based real estate investment trust that specializes in placing investments in recreation or entertainment developments, announced it was deferring a planned $1 billion investment in a gaming venue. The company said it backed off the investment, at least for now, because of “unfavorable current market conditions.”
“During these unprecedented times, our decisions today reflect our long-term commitment to maintaining the strength of our balance sheet,” said EPR president and chief executive Greg Silvers in a statement.
Silvers’ statement said the company’s balance sheet, with low leverage and no approaching debt maturities, would allow EPR to weather the current market conditions. EPR’s stock dropped 36% to close at $28.29 a share.
Seaboard, a Merriam-based conglomerate involved in agriculture and shipping, among other things, has had a volatile day on Wall Street with several ups and downs in trading. Seaboard shares were trading at $2,999 a share during midday trading, down from $3,948 on Feb. 21.
This story was originally published March 12, 2020 at 2:31 PM.
