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How would the cannabis industry handle a possible recession?

Jul 8, 2022 | Media Partners, The GrowthOp

This post is presented by our media partner The Growth Op
View the original article here.

The sector showed impressive gains during the pandemic while many industries teetered on the edge of collapse.

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A year ago, there were only whispers of a recession. Now, talk of that possibility is starting to dominate conversations, with both companies, including those in cannabis, and citizens worried about the months to come.

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A recession is not at all certain, but experts are reporting the likelihood is higher than it was previously. “The probability of a recession over the next 12 months is now 30 per cent, the highest since 2020,” according to Bloomberg. This percentage is double the odds predicted just three months ago, it adds.

It’s no secret that the U.S. is in pretty shaky and uncertain financial times. Interest rates are on the rise, there have been ongoing supply chain issues, the stock market is depressed and an ongoing war in Ukraine.

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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 this sector thrive in these tough times?

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Consider that 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 certainly not recession-proof, can fare better than some 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 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, albeit short, and ability to bounce back and rise, perhaps higher than ever before.

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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 weed.

“Obviously, the inflation factor is happening everywhere,” Aaron Smith, CEO of the National Cannabis Industry Association, told the Denver Post. Some cannabis users are “probably cutting down on consumption because they’re having a hard time making ends meet or paying their bills,” Smith added.

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

The demand for cannabis will surely be less than the demand for food and living expenses, and some may find themselves spending only on needs, not wants.

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But while financial may loom, there are appears to be some hope.

Some places in the U.S., such as Rhode Island, have voiced optimism when it comes to the marijuana industry.

According to NBC affiliate WJAR, the U.S. Department of State’s Bureau of Administration projects US$41 million in cannabis sales in just the first seven months of cannabis legalization in the state, starting on Dec. 1.

So, while the U.S. braces in many ways for a possible economic downturn, some states remain hopeful that cannabis can provide welcomed prosperity to their state’s economies.

Though not recession-proof, cannabis is certainly a desirable product and the industry, to date, has proved fairly resilient.

Cannabis is also a young business, and even if the economy, in general, takes a dip, weed is just starting to test the waters in many U.S. states. This means there is potential for growth in the industry, even if the country, as a whole, witness a shrinking economy for a period of time.

The, a U.S. lifestyle site that contributes lifestyle content and, with their partnership with 600,000 physicians via Skipta, medical marijuana information to The GrowthOp.

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