Thursday, August 18, 2022

How Would The Marijuana Industry Handle A Possible Recession?

Even if the economy in general takes a dip, marijuana is just beginning to test the waters in many states.

A year ago, there were only whispers of a recession. Now it is starting to dominate conversations, and it has companies and citizens worried about the months to come.

A recession is not at all certain, but experts are saying the likelihood is higher than it was before. “The probability of a recession over the next 12 months is now 30%, the highest since 2020,” according to Bloomberg. This number, they said, is double the odds that were predicted just three months ago. 

counting money
Photo by Tima Miroshnichenko from Pexels

RELATED: Cannabis Insiders Split On Market Impact Of Inflation

It is no secret that this country is in pretty shaky and uncertain financial times. Interest rates are on the rise, there have been ongoing supply chain issues, a depressed stock market and an ongoing war in Ukraine that shows no signs of letting up any time soon. “Bleak” is a word we all are hearing more than we would like these days. 

But just because many facets of the economy and daily life have been negatively affected, does this mean the cannabis industry will also take a nosedive? Or can it thrive in these tough times? After all, the industry showed impressive gains during the pandemic while so many other industries teetered on the edge of collapse.

The answer to these questions is a bit complicated, but there is hope that cannabis, although not recession proof, can fare much better than other industries in tough financial times. According to Investing Daily, “Many cannabis stocks have been caught in the downdraft, as investors shift to risk-off mode,” but that when the broader market starts to turn around, “cannabis stocks are likely to stage an even sharper upward trajectory.”

In other words, while cannabis stocks and the industry are not immune to the economic downturn, it has a tack record and ability to bounce back and rise higher than ever before.

While there is hope that cannabis can bounce back quickly, the fact remains that as finances become tight, people might not spend as much on marijuana. “Obviously, the inflation factor is happening everywhere,” Aaron Smith, CEO of the National Cannabis Industry Association, told the Denver Post,  adding that some cannabis users are “probably cutting down on consumption because they’re having a hard time making ends meet or paying their bills.”

Even as many dispensaries offer their lowest rates with sales and promotions, if a consumer is struggling to pay for basic necessities, a marijuana budget simply might not exist.

It is a hard truth that the demand for cannabis is less than the demand for food and living expenses, and some may find themselves in a position where there is only enough money for the needs, rather than the wants. Still, even if a bit of financial gloom may linger in the distance, there is also hope.

cannabis money
Photo by anankkml/Getty Images

RELATED: Will Rising Gas Prices Change The Price Of Marijuana?

Some places, like Rhode Island, have optimism when it comes to the marijuana industry. According to NBC affiliate WJAR, the State Department of Administration projects $41 million in marijuana sales in just the first seven months of marijuana legalization in the state, starting on December 1. So while the country braces in many ways for a possible economic downturn, some states like Rhode Island are hopeful that marijuana can provide welcomed prosperity to their state’s economies.

Marijuana is not recession proof, but it is certainly a desirable product and a resilient industry. It is also a young business, and even if the economy in general takes a dip, marijuana is just beginning to test the waters in many states. This means there is potential for growth in the industry, even if the country as a whole sees a slightly shrinking economy for a period of time.

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