No scenario is positive if there is a negative supply shock in some sectors

The new health standards due to the COVID epidemic will lead to a decline in labour and capital productivity - and therefore to a negative supply shock - in many business sectors (industry, construction, retail, restaurants, etc.). How can companies in these sectors react? They can: Increase their selling prices to offset the rise in their unit production costs; nominal wages are likely to rise only slightly, so there would be an overall fall in purchasing power, and a fall in demand for goods and services from sectors not affected by the supply shock; Refrain from increasing their selling prices and accept a fall in their profit margins; this would also be very negative as it would prevent these companies from financing the modernisation and automation investments they need to correct the fall in productivity. The situation is clearly negative in both cases. In the past, increases in unit labour costs in the euro zone led to both faster price increases and lower profit margins.