Dr. Fauci, lead member of the Trump Administration’s White House Coronavirus Task Force
After all this is over, questions are going to be asked on whether a different course could have been taken.
This is the only pandemic in which we locked down the American economy. 16 million jobs have been lost and will continue to grow. Could we have done better? I think we could’ve.
Gateway Pundit reports while the US shuts down all commerce for weeks and destroys the economy, other countries like Sweden and Brazil are doing the opposite and allowing the China coronavirus to run its course.
Data indicates there no material differences in fatalities between the three countries leading the casual observer to question why is the US killing its economy?
The US continues to prevent nearly all commerce from occurring to combat the China coronavirus. Many other countries are following suit. But some countries like Sweden and Brazil are keeping their countries open for business.
Data shows that the fatalities related to the coronavirus in these countries are very similar to those in the US.
In recent decades, flu season has often peaked sometime from January to March, and this is a major driver in total deaths. The averagedaily number of deaths from December through March is over eight thousand.
So far, total death data is too preliminary to know if there has been any significant increase in total deaths as a result of COVID-19, and this is an important metric, because it gives us some insight into whether or not COVID-19 is driving total death numbers well above what would otherwise be expected.
Indeed, according to some sources, it is not clear that total deaths have increased significantly as a result of COVID-19. In a March 30 article for The Spectator, former UK National Health Service pathologist John Lee noted that the current number of deaths from COVID-19 does not indicate that the UK is experiencing “excess deaths.” Lee writes:
The simplest way to judge whether we have an exceptionally lethal disease is to look at the death rates. Are more people dying than we would expect to die anyway in a given week or month? Statistically, we would expect about 51,000 to die in Britain this month. At the time of writing, 422 deaths are linked to Covid-19—so 0.8 per cent of that expected total. On a global basis, we’d expect 14 million to die over the first three months of the year. The world’s 18,944 coronavirus deaths represent 0.14 per cent of that total. These figures might shoot up but they are, right now, lower than other infectious diseases that we live with (such as flu). Not figures that would, in and of themselves, cause drastic global reactions.
How do these numbers look in the United States? During March of 2020, there were 4,053 COVID-19 deaths according to Worldometer. That is 1.6 percent of total deaths in March 2019 (total data on March 2020 deaths is still too preliminary to offer a comparison). For context, we could note that total deaths increased by about four thousand from March 2018 to March 2019. So for March, the increase in total deaths is about equal to what we already saw as a pre-COVID increase from March 2018 to March 2019.
As Lee notes, total COVID-19 deaths could still increase significantly this season, but even then we must ask what percentage of total deaths warrants an international panic. Is it 5 percent? Ten percent? The question has never been addressed, and so far, a figure of 1 percent of total deaths in some places is being treated as a reason to forcibly shut down the global economy.
Meanwhile there is a trend toward to attributing more of those pneumonia deaths to COVID-19 rather than influenza, although this doesn’t actually mean the total mortality rate has increased. The CDC report continues: “the percent of all deaths with Influenza listed as a cause have decreased (from 1.0% to 0.8%) over this same time period. The increase in pneumonia deaths during this time period are likely associated with COVID-19 rather than influenza.” This doesn’t represent a total increase in pneumonia deaths, just a change in how they are recorded.
This reflects an increased focus on attributing deaths to COVID-19, as noted by Lee:
In the current climate, anyone with a positive test for Covid-19 will certainly be known to clinical staff looking after them: if any of these patients dies, staff will have to record the Covid-19 designation on the death certificate—contrary to usual practice for most infections of this kind. There is a big difference between Covid-19 causing death, and Covid-19 being found in someone who died of other causes. Making Covid-19 notifiable might give the appearance of it causing increasing numbers of deaths, whether this is true or not. It might appear far more of a killer than flu, simply because of the way deaths are recorded.
Given this rush to maximize the number of deaths attributable to COVID-19, what will April’s data look like? It may be that COVID-19 deaths could then indeed number 10 or 20 percent of all deaths.
But the question remains: will total deaths increase substantially compared to April 2019 or April 2018? If they don’t, this will call into question whether or not COVID-19 is the engine of mortality that many government bureaucrats insist it is.After all, if April’s mortality remains “about the same” as the usual total and comes in around 230,000–235,000, then obsessive concern over COVID-19 would be justified only if it can be proven April 2020 deaths would have plummeted year-over-year had it not been for COVID-19.
COVID-19 should be reported on the death certificate for all decedents where the disease caused or is assumed to have caused or contributed to death. Certifiers should include as much detail as possible based on their knowledge of the case, medical records, laboratory testing, etc. If the decedent had other chronic conditions such as COPD or asthma that may have also contributed, these conditions can be reported in Part II. [emphasis in original.]
This is extremely likely to inflate the number of deaths attributed to COVID-19 while pulling down deaths attributed to other influenza-like illnesses and to deaths caused by pneumonia with unspecified origins. This is especially problematic since we know the overwhelming majority of COVID-19 deaths occur in patients that are already suffering from a number of other conditions. In Italy, for example, data shows 99 percent of COVID-19 deaths occurred in patients who had at least one other condition. More than 48 percent had three other conditions. Similar cases in the US are now likely to be routinely reported simply as COVID-19 cases.
Unfortunately, because total death data is not reported immediately, we have yet to see how this plays out.
We do know historically, however, that deaths attributed to flu and pneumonia over the past decade have tended to make up around five to ten percent of all deaths, depending on the severity of the “season.” Last week (week 14, the week ending April 4) was the first week during which COVID-19 deaths exceeded flu and pneumonia deaths, coming in at 11 percent of all death for that week. The prior week, (week 13, the week ending Mar 28) COVID-19 deaths made up 3.3 percent of all deaths.
Until we have reliable numbers on all deaths in coming weeks, it will be impossible to know the extent to which COVID-19 are “cannibalizing” flu and pneumonia deaths overall. That is, if the COVID-19 totals skyrocket, but total deaths remain relatively stable, than we might guess that many deaths formerly attributed simply to pneumonia, or to flu, are now being labeled as COVID-19 deaths. Potentially, this could also be the case for other patients, such as those with advanced cases of diabetes.
As pro-establishment mouthpieces downplay the efficacy of hydroxychloroquine to treat COVID-19 as “anecdotal” with “little evidence that the treatment is effective,” yet another doctor treating has claimed dramatic improvement in coronavirus patients within hours of taking the anti-malaria drug in combination with two other medications.
Los Angeles doctor Anthony Cardillo says he’s seen very promising results when the Trump-touted drug is combined with zinc for severely-ill coronavirus patients.
“Every patient I’ve prescribed it to has been very, very ill and within 8 to 12 hours, they were basically symptom-free,” Cardillo told Eyewitness News, adding “So clinically I am seeing a resolution.”
Cardillo, CEO of Mend Urgent Care, says that the drug must be used in conjunction with Zinc, as the hdroxycholoroquine opens a ‘channel’ for the mineral to enter cells and prevent the virus from replicating.
Los Angeles Doctor, Dr. Anthony Cardillo speaks of potential benefits of Hydroxychloroquine combined with Zinc. pic.twitter.com/fQ68HpsKup
Commonly used for lupus and arthritis, hydroxychloroquine has been approved by the FDA for limited emergency authorization to treat COVID-19 patients.
That said, Cardillo warns that the treatment should only be reserved for those with moderate to severe symptoms due to concerns over shortages.
“We have to be cautious and mindful that we don’t prescribe it for patients who have COVID who are well,” he said, adding “It should be reserved for people who are really sick, in the hospital or at home very sick, who need that medication. Otherwise we’re going to blow through our supply for patients that take it regularly for other disease processes.”
Previously we reported that the US restaurant and retail industries have all but shut down. We can now add airlines.
According to this stunning chart from Deutsche Bank’s Torsten Slok, US airline passenger traffic is currently just 10% of normal. As Slok explains, “on a normal day in March, over 2 million people travel by air in the United States. Yesterday that number was 279,018.”
Holidaymakers have been asked to leave and others warned to avoid the area surrounding Dockweiler Beech RV site (pictured) in the city of El Segundo, California, amid preparation for the growing Coronavirus pandemic
Los Angeles’ homeless population could find themselves self-isolating inside a beachside RV in the coming months – as California frees up hundreds of motorhomes and hotel rooms for those in need.
Holidaymakers have been asked to leave and others warned to avoid the area surrounding Dockweiler Beech RV site in the city of El Segundo, California, amid preparation for the growing Coronavirus pandemic.
Hand washing stations have popped up in Los Angeles and San Francisco around large homeless populations and Governor Gavin Newsom revealed the state is acquiring around 900 hotels with tens of thousands of rooms to be converted for the use of both hospital patients and the homeless.
In the next few weeks, dozens of camper vans parked along the beach front are expected to become home to vagrants ordered into quarantine.
California boasts a homeless population of more than 100,000 and with no way for them to wash their hands or maintain hygiene, it was a highly at-risk group – diseases already run rife with central LA’s Skid Row recently seeing outbreaks of typhus and Hepatitis A.
The Century Bar, Dayton Ohio (image from Facebook)
Is a global recession already beginning as the vast majority of the US and other countries’ workforce grinds to a halt while large cities begin to receive ‘shelter in place’ directives? Yes, says Goldman; and more and more top economists are saying Tuesday it’s a near-certainty. State unemployment numbers are about to bear that out.
A new Marist poll this week for NPR/PBS News found 18% of US adults responding they’d already either been laid off or had significant reduction of hours due to the ripple effect of the pandemic.
For an indicator of just how high national unemployment may skyrocket, look no further than Ohio, which on Sunday night declared a ‘health emergency’ and shut down all bars and restaurants state-wide. Journalist Liz Skalka for The Toledo Bladereports that Ohio Senator Rob Portman (R) received“new data on Ohio’s unemployment claims today: 45,000 claims this week compared to 6,500 last week.”
The state-wide ordered shutdown of dining and drink establishments by Ohio Governor Mike DeWine on Sunday night impacted about 10% of the state’s workforce, some 500,000 people.
A 45,000 unemployment claims number jump from 6,500 means a whopping one-week increase of 592%, and surely now already to soar past 600% into next week.
Likely, Ohio is the canary in the coal-mine at a moment restaurants and bars across New York, California, and other large states are also fast being ordered to shutter their doors.
if this is accurate, and if representative of nat'l trends, that would suggest new UI claims are jumping by a factor of 7., putting them in the 1.4-1.5 million range. That's more than double where they were at the peak of the last recession. Hmmm.https://t.co/oxSYAUs9yJ
As of Tuesday Ohio announced67 confirmed Covid-19 cases across 16 counties, resulting in 17 hospitalizations thus far.
Federal data issued in February counts11,674,000 employees in restaurants in bars across the nation. These jobs are about to be decimated, assuming the latest breaking Ohio numbers of just the past week sets the trend.
“I think that the odds of a global recession are close to 100 percent right now,” Kevin Hassett, Trump’s former chair of the Council of Economic Advisers told CNN on Tuesday. “I think in the US, we’re going to have a very terrible second quarter.”
“You’re looking at one of the biggest negative jobs numbers that we’ve ever seen,” he added, warning further the US is set to shed 1 million jobs in March.
WASHINGTON (AP) — The Trump administration says individuals and businesses will be allowed to delay paying their 2019 tax bills for 90 days past the usual April 15 deadline. The extension announced Tuesday is an effort to inject up to $300 billion into the economy at a time when the coronavirus appears on the verge of causing a recession.
Treasury Secretary Steven Mnuchin speaks during a press briefing with the coronavirus task force, at the White House, Tuesday, March 17,… (AP Photo/Evan Vucci)
Treasury Secretary Steven Mnuchin said individuals will be able to delay paying up to $1 million in payments. Corporations will be able to defer payment on up to $10 million.
Taxpayers will still have to file their tax returns by the April 15 deadline. But they won’t have to pay their tax bill for 90 additional days. During that time, individuals and corporations will not be subject to interest or penalty payments.
“All you have to do is file your taxes,” Mnuchin said.
The Treasury secretary said President Donald Trump had approved the final details of the program, including its expansion to include the potential of allowing taxpayers to keep $300 billion in the economy for now. Last week, Mnuchin had estimated that deferred payments would amount to $200 billion.
Mnuchin had said the delay would apply to all but the “super rich” but did not spell out how the payment delay will work. The IRS has yet to release specific guidelines for the program.
The IRS is using authority under Trump’s national emergency declaration to take the step of approving the 90-day payment delay. Mnuchin encouraged taxpayers to keep filing their returns because many of them will be receiving refunds that they will be able to use to pay bills during the economic downturn.
As of Feb. 21, the IRS had issued more than 37.4 million refunds averaging $3,125.
Mark Zandi, chief economist at Moody’s Analytics, said that the tax delay program was only a stop-gap program but that it should help cushion the economy during a period of severe stress.
“Individuals and small businesses need cash right now,” Zandi said. “Anything that delays them having to send a check to the IRS will allow them to pay for their groceries and make mortgage payments and pay other bills.”
Under normal filing procedures, taxpayers must pay their obligations by April 15, although they can get a six-month extension to file the full return.
Mnuchin, who spoke to reporters at the White House, said that as part of a stimulus plan being negotiated with Congress, the administration is considering ways to send checks to Americans to help alleviate the impact of job losses from layoffs at restaurants and the tourism industry.
“Americans need cash now, and the president wants to give cash now and I mean now in the next two weeks,” Mnuchin said.
In many ways the US economy is currently in the eye of the coronavirus storm: cities and states are under quarantine lockdown, the CDC has prohibited any groupings of more than 50 people; stores, clubs, restaurants, bars and hotels are voluntarily shuttering indefinitely as the economy grinds to a halt and yet besides a tapestry of ghost cities across the nation, the immediate impact of the devastating viral storm on the service economy has yet to manifest itself.
But the hurricane is about to hit front and center, and the service-industry mecca of New York City is leading the way.
As the Daily News reports,New York’s unemployment website was overwhelmed Monday as the coronavirus pandemic put tens of thousands of people across the state out of work.
The flood of suddenly jobless workers hitting the Department of Labor website with applications for unemployment benefits was unleashed by a drastic move by Gov. Cuomo, who announced all of the state’s restaurants, bars, movie theaters, gyms and casinos would close by 8 p.m. Monday to contain the corona outbreak.
So many people tried to apply that the website crashed several times throughout the day, while the DOL’s hotline was so jammed up that callers seeking aid could not get through to someone who could handle their claim.
The unemployed can apply from 7:30 a.m. to 5 p.m. on weekdays. DOL spokeswoman Deanna Cohen said the department saw a “spike in volume comparable to post 9/11,” adding there are more than 700 staffers assigned to handle the high demand.
Gabe Friedman, unemployed drag queen
“I’m completely unable to log in and apply” said 26-year-old Gabe Friedman, a drag queen who performs under the name Kiki Ball-Change. “Me and so many other drag queens are completely out of work for at least two months. If I pay rent at the end of April, I would be broke.”
It’s not just the drag queens that find themselves with zero demand for their unique “skills”: tens of thousands of workers across New York’s service industries have already been, or are about to be let go as their employers are forced to either shut down permanently or hibernate until the economy recovers.
The DOL on Sunday waived a seven-day waiting period on unemployment benefits for people out of work due to coronavirus — but that concession proved to be moot as many people could not apply at all.
Rita Lee, 57, who works in the film industry (hopefully not as a drag king), said she started to apply Sunday night after movie productions shut down across the city. She hit a wall once applications opened Monday.
From 11 a.m. to 3 p.m. Lee tried and failed to apply on the website, saying she kept “getting either a system or server error message, or the page will never load.”
“I’ve called all the toll-free numbers, which are recordings that redirect you to a main menu or a message saying that all the operators are overloaded now and to call back,” said Lee. “Can’t reach a human to help.”
David Stollings, a sound engineer at a now-shuttered Broadway theater, called the situation a doozy. “I got the site to load once,” said Stollings. “Before this it was just not loading at all.”
Marnia Halasa, a Manhattan-based figure skating coach, said she was also unable to apply and became worried about paying rent. “What if I have to blow the New York popsicle joint and run back to Ohio to live with my father?,” asked Halasa, who’s lived in the city for 28 years.
* * *
While it is not clear how many New Yorkers will lose their jobs due to the pandemic, Empire Center founder E.J. McMahon told the NYDN the hit could be worse than the Great Recession of the late 2000s when roughly 370,000 people lost their jobs in a more than two-year span.
“The website crashed, that’s evidence that there has never been anything like this so quickly,” said McMahon. “You can fix a computer glitch. But I don’t think the problem is how the safety net operates. I think the problem is how the economy operates in the future for all these people.”
Incidentally, the chief economist of a multi-billion macro hedge fund advised us that they are now modeling approximately 10 million job losses over the next two to three months. We leave it up to readers to decide if that’s too little, too much or just right.
SANTA BARBARA, Calif. – The Employment Development Department (EDD) of California is providing workers who are unable to work because of the coronavirus with various insurance claims they may be eligible for.
Governor Gavin Newsom informed the public about these claims on Twitter Monday afternoon.
If your hours have been reduced or your employer has shut down operations due to Coronavirus — you can file an Unemployment Insurance claim.
The Unemployment Insurance claim provides partial wage replacement benefit payments to workers who lose their job or have their hours reduced, through no fault of their own.
The department says workers must remain able and available and ready to work during their unemployment for each week of benefits claimed and meet all other eligibility criteria. Eligible individuals can receive benefits that range from $40-$450 per week.
The department is also reminding individuals that they can file a Disability Insurance claim if they become sick or quarantined with the coronavirus. This claim, which is available for non-work-related illness, injury or pregnancy, provides short-term benefit payments who are losing money due to their health condition.
In order to file for this claim, the worker’s claims must be certified by a medical professional. Benefit amounts are listed as being around 60-70 percent of wages (depending on income) and would range from $50-$1,300 a week.
Those who are unable to work because they are caring for someone sick with the coronavirus are able to file a Paid Family Leave claim. This claim provides up to six weeks of benefit payments to workers who are losing wages while caring for a family member with a serious illness.
The benefits from the Paid Family Leave claim would cover 60-70 perfect of the worker’s wages (depending on income) and would range from $50-$1,300 a week as well.
For more information from the EDD about potential insurance claims related to the coronavirus, you can visit their website here.
(Denise Lones) There are many ways to react about the virus breakout. It doesn’t seem to matter where you go – the news is talking about it everywhere. It is completely normal to feel concerned, unsure, nervous, worried, and more.
However, the reality is that there is not a lot that any of us can do about the virus other than be informed and be aware of the things that we can do to keep ourselves and our families safe. From a business perspective it may seem like there is a lot of doom and gloom out there, but there are many things you could be doing to keep yourself busy and productive.
If you find yourself more home bound than usual, there are some things that you can do to make that time productive. You can:
Catch up on your client connections by sending out a mailer or cards,
Work on your Annual Client Reviews which often get put off because you are too busy,
Do custom research for each of your potential clients and send it to them now, while they too may be home bound and have extra time.
While it may feel like the world is slowing down and that real estate may come to a screeching halt, that is just not realistic, and it is not worth worrying about. Stop panicking and start taking action to catch up on projects or to help your potential buyers and sellers plan to do the things that they haven’t had time to do. How many times does a seller tell you that they can’t put their home on the market until they paint a room or put away their belongings or do a deep cleaning? This could be the perfect time for them to complete this project that never seems to make it into their regular schedule.
While the rest of the world may be focusing on only the negative try to keep your mind focused on something more positive and productive. Sit down and make a list of all the projects you would love to complete and then start tackling them.
Don’t spend your time focusing on the “what ifs” of this virus. Focus on what you have control over which is making a huge dent in the things you have been putting off. It is normal to worry, but try to put things into a more positive light.
While mom and dad on Main St. still aren’t getting the dire warning that the coronavirus has been offering up to Asia and the rest of the Eastern world over the last several weeks, perhaps a light bulb will finally go off when Jane Q. Public heads to the grocery store and is unable to buy shampoo and toothpaste.
Proctor and Gamble, one of the world’s biggest “everyday product” manufacturers, has now officially warned that 17,600 of its products could be affected and disrupted by the coronavirus. The company’s CFO, Jon Moeller, said at a recent conference that P&G used 387 suppliers across China, shipping more than 9,000 materials, according to CIPS.org.
Moeller said: “Each of these suppliers faces their own challenges in resuming operations.”
And it’s not just everyday consumer goods that are going to feel the impact of the virus.
Smartphones and cars are so far among the consumer products that have been hardest hit from the virus. In fact, according to TrendForce, “forecasts for product shipments from China for the first quarter of 2020 had been slashed, by 16% for smartwatches (to 12.1m units), 12.3% for notebooks (30.7m units) and 10.4% for smartphones (275m units). Cars have dropped 8.1% (19.3m units).”
Their report states: “The outbreak has made a relatively high impact on the smartphone industry because the smartphone supply chain is highly labor-intensive. Although automakers can compensate for material shortage through overseas factories, the process of capacity expansion and shipping of goods is still expected to create gaps in the overall manufacturing process.”
A separate coronavirus analysis by Mintec says that “Chinese demand for copper (it has hitherto been responsible for consuming half the world’s output), will fall by 500,000 tonnes this year, and falls in demand have already impacted prices. From December to January the price of copper fell 9.6%.”
The report notes: “Millions of people have been affected by the travel lock down in Hubei province, the centre of the outbreak. This has been responsible for a glut of jet fuel and diesel on global markets at a time when petroleum supplies were already abundant.”
Other products that have been negatively affected so far include pork, which is up 11% this month, chicken, garlic and dried ginger.
Product supply chain issues could eventually compound hysteria at supermarkets if coronavirus becomes widespread in western countries. Northern Italy, which has seen a small outbreak of coronavirus cases over the last 48 hours, is already experiencing long lines and sold out store shelves.
In the last few weeks, ZeroHedge provided many articles on the evidence of creaking global supply chains fast emergingin China and spreading outwards. Anyone in supply chain management, monitoring the flow of goods and services from China, has to be worried about which regions will be impacted the most (even if the stock market couldn’t care less).
Deutsche Bank’s senior European economist Clemente Delucia and economist Michael Kirker published a note on Thursday titled “The impact of the coronavirus: A supply-chain analysis” identifying the effect of contagion on the rest of the world, mainly focusing on demand and spillover effects into other countries.
The economists constructed a ‘dependency indicator,’ to figure out just how much a country depends on China for the supply of particular imported inputs. It was noted that the more a country depends on China, the more challenging it could be for businesses to find alternative sourcing during a period of supply chain disruptions.
The biggest takeaway from the report is that, surprisingly, the European Union is less directly exposed to a China supply-chain shock than the US, Canada, Japan, and all the major Asian countries (i.e., India, South Korea, Indonesia, Malaysia, Vietnam).
It was determined that in the first wave of supply chain disruptions that “euro-area countries are somewhat less directly dependent on China for intermediate inputs than other major economies in the rest of the world.”
“The euro-area countries have, in general, a dependence indicator below the benchmark. This suggests that euro-area countries have a below-average direct dependence on Chinese imports of intermediate inputs (Figure 2).”
But since China is highly integrated into the global economy, and a supply chain shock would be felt across the world. The second round of disruptions would result in lower world trade growth that would eventually filter back into the European economy.
The US, Japan, Canada, and all the major Asian countries would feel an immediate supply chain shock from China.
Here’s a chart that maps out lower dependency and higher dependency countries to disruption from China.
To summarize, the European Union might escape disruptions from China supply chain shocks in the first round, but ultimately will be affected as global growth would sag. As for the US and Japan, Canada, and all the major Asian countries, well, the disruption will be almost immediate and severe with limited opportunities for companies to find alternative sourcing.
“First of all, our analysis does not take into account non-linearity in the production process. In other words, it does not capture consequences from a stop in production for particular product. It might indicate that given the dependence is smaller, Europe could find it somewhat easier substitute a Chinese product with another. But there is no guarantee this will be the case.”
“Secondly, while our results indicates that the direct impact from supply issues in China could be smaller for the euro area than for other regions in the world, the euro area could be hard-hit by second-round effects. With their higher direct exposure to China, production in other major economies could slow down as a result of disruptions in the supply chain. This not only could cause a shortage in demand for euro-area exports, but it could also impact on the euro-area’s import of intermediate inputs from these other countries (second-round effects). In other words, China has become a relevant player in the world supply chain and production/demand problems in China are spread worldwide through direct and indirect channels.“
News flow this week has indeed suggested the virus is spreading outwards, from East to West, and could get a lot worse ex-China into the weekend.
The mistake of the World Health Organization (WHO), governments, and global trade organizations to minimize the economic impact (protect stock markets) of the virus was to allow flights, businesses, and trade to remain open with China. This allowed the virus to start spreading across China’s Belt and Road Initiative (BRI).
Enjoy a riveting weekly news wrap up with Greg Hunter…
Which Supply Chains Are Most At Risk: The Answer In One Chart
Now that Apple has broken the seal and made it abundantly clear that China’s economic collapse which could push its Q1 GDP negative according to Goldman as the second largest world economy grinds to a halt (as described here last week)…
… will have an adverse impact on countless supply-chains, which in today’s “just in time” delivery environment, are absolutely critical for keeping the global economy running smoothly (for a quick reminder of what happens when JIT supply chains stop functioning read our article from 2012 “”Trade-Off”: A Study In Global Systemic Collapse“), attention on Wall Street has turned to which other US sectors stand to be adversely impacted should the coronavirus pandemic not be contained on short notice and China’s economy crisis transforms into a supply shock.
Conveniently, Goldman Sachs just did this analysis.
New evidence from Bloomberg reveals cracking global supply chains are fast emerging at major Chinese ports with thousands of containers of frozen meat piling up with nowhere to go.
The Covid19 outbreak will remain a dominant issue for 1Q as supply chain shocks are being felt by multinationals on either side of the hemisphere.
Sources told Bloomberg that containers of frozen pork, chicken, and beef (mostly from South America, Europe, and the US) are piling up at Tianjin, Shanghai, and Ningbo ports because of the lack of truck drivers and many transportation networks remain closed.
Seaports in China are quickly running out of room to house the containers and cannot provide enough electricity points to keep existing containers cold. This has forced many vessels to be rerouted to other destinations.
We’ve already noted that Bloomberg’s Stephen Stapczynski recorded footage of an oil tanker parking lot off the Singapore coast last week as refiners in China cut runs as crude consumption has collapsed by more than 4 million barrels per day.
It’s clear that a logistical nightmare is unfolding as two-thirds of the Chinese economy has effectively shut down much of its production capacity, producing a massive “demand shock.”
The impact on the global economy is already dragging down world trade and could force the World Trade Organization (WTO) to slash economic growth forecasts for the year.
The Chinese economy constitutes about 20% of global GDP, and supply chain disruptions across China could cause a cascading effect that could tilt the world into recession.
But it’s not just frozen meats piling up at Chinese ports or a crude glut developing. There’s a high risk that product shortages to Western countries could be 60-90 days out.
Alibaba Group’s CEO Daniel Zhang warned last week that the supply chain disruption, or “shock,” is a “black swan event” for the global economy.
It’s not only Chinese tourists, business travelers, and property buyers who’re not showing up, but also travelers from all over the world who’ve gotten second thoughts about sitting on a plane.
Wyndham Closes 1,000 Hotels, Hilton 150, Best Western 65% In China, Fiat Chrysler Halts Production!
Literally, everything is shutting down. I can’t even fit everything into the title. First, The world’s largest Hotel company by properties announced they will be temporarily closing 1,000 Hotels in China. This amounts to over 70% of their hotels and the CEO said the Hotels that remain open are running under 75% Guest capacity. They expect a huge financial impact. Hilton hotels also announced they will be closing 150 hotels in China along with Best Western. We then move to the recent data compiled by Goldman detailing the true weight of the industrial production halt. Steel demand is Crashing, Construction Steal demand has collapse 88%. Fiat Chrysler warned that they would need to halt production at one of their plants outside of China due to parts shortages and The plant has come to a halt as the problem is not resolved. The company said it is in the process of attaining the product from another source. Last but not least Carnival Corp has warned of a significant financial impact in their upcoming earnings report and they pulled their full-year 2020 forward guidance due to changes.
Bloomberg focuses on how an industrial shutdown of China’s economy has already had a profound effect on India’s economy and could get worse.
Pankaj R. Patel, chairman of Zydus Cadila, said prices of medicine in India have exponentially jumped in the last several weeks, thanks to much of the medicine is sourced from China.
The Indian pharmaceutical industry is experiencing massive disruptions that could face shortages starting in April if supplies aren’t replenished in the next couple weeks, Patel warned.
Manufacturers in China have idled plants, and at least two-thirds of the economy is halted. Some factories came online last week with promises of full production by the end of the month, but for most factories, their resumption will likely be delayed. This will undoubtedly lead to medicine shortages in India in the coming months ahead.
A new theme is developing from all this mayhem – that is the reorganization of complex supply chains out of China to a more localized approach to avoid severing. But in the meantime, these complex supply chains in India and across the world will experience massive disruption caused by the shutdown. All of this points to ugly end of globalization:
Pankaj Mahindroo, chairman of the India Cellular and Electronics Association (ICEA), said the wrecking of supply chains in China could soon have a devastating impact on India’s smartphone production.
Mahindroo represents companies including Foxconn, Apple Inc., Micromax Informatics Ltd., and Salcomp India, warned the “impact is already visible… If things don’t improve soon, production will have to be stopped.”
Already, the production of iPhones and Airpods has been reduced in China because of factory shutdowns.
The closure of Foxconn plants in India would be absolutely devastating for Apple.
Apple produces iPhone XR in India. If the production of affordable smartphones is halted or reduced, the Californian based company could see full-year earnings guidance slashed.
Mohnidroo said if things don’t improve in the next couple of weeks, smartphone factories in India could start running out of “critical components like printed circuit boards, camera modules, semiconductors, resistors, and capacitors.”
A spokesperson for Xiaomi Corp.’s India unit said alternative sourcing attempts are underway to mitigate any supply chain disruption from China.
Former Indian Finance Minister Yashwant Sinha warnedseveral months ago that the country is in a “very deep crisis,” witnessing “death of demand,” and the government is “befooling people” with its economic distortionsof how growth is around the corner.
Supply chain disruptions are moving from East to West. It’s only a matter of time before production lines are halted in the US because sourcing of Chinese parts is offline. The disruptions of supply chains is the shock that could tilt the global economy into recession.
It’s certainly plausible that the global economy is in the early stages of grinding to a halt. Already, we’ve noted that two-thirds of China’s economy is offline, with major industrial hubs idle and 400 million people quarantined.
The next phase of the supply chain chaos is to spread to regions that are overly reliant on Chinese parts for assembly, such as a Fiat Chrysler Automobiles NV plant in Serbia.
Bloomberg reports Friday morning that the plant is expected to halt operations of its assembly line because of the lack of parts from China as the Covid-19 outbreak worsens.
Turin, Italy-based automaker’s Kragujevac factory in Serbia, which assembles the Fiat 500L, has to bring its production line to a halt due to lack of audio-system and other electric parts sourced from China.
Four of the automaker’s suppliers have been impacted by China’s decision to shut down much of its industrial sector as part of a quarantine that’s expected to take a massive chunk out of GDP growth in the first half.
Fiat Chrysler CEO Mike Manley said four of the company’s suppliers in China had already been affected by the outbreak, including one “critical” maker of parts putting European production at risk.
The evolution of the supply chain disruption emanating from China is spreading outwards and to the West.
Wall Street is blind as a bat, or maybe their hope the Federal Reserve will keep pumping liquidity into the market will numb the pain of one of the most significant shocks expected to hit the global economy in the near term. This is mostly due to the world’s most complex supply chains, which as of late January, have been severed and will start affecting assembly plants in Europe.
The disruption could spread to the US, where many assembly plants source parts from China.
What’s about to hit the global economy was beautifully outlined by former Morgan Stanley Asia chairman Stephen Roach warned several weeks ago that the global economy could already be in a period of vulnerability, where an exogenous shock, such as the Covid-19, could be the trigger for the next worldwide recession.
Mohamed El-Erian, the chief economic adviser to the insurance company Allianz, recently said the economic damage caused by virus outbreak would play out this year.
El-Erian said the economic shock to China and surrounding manufacturing hubs is happening at a time when the global economy is slowing, and interest rates among central banks are near zero, indicating their ammo to fight the downturn is limited.
Freeport-McMoRan CEO Richard Adkerson said in an interview last month that the virus outbreak in China is a “real black swan event” for the global economy.
Alibaba Group’s CEO Daniel Zhang said this week that the virus outbreak in China is developing into a “black swan event” that could have severe consequences for China and the global economy.
When the world’s most complex supply chains break, so does the global economy. It’s only a matter of time before disruption is seen in the US.
In our ongoing attempts to glean some objective insight into what is actually happening “on the ground” in the notoriously opaque China, whose economy has been hammered by the Coronavirus epidemic, yesterday ZeroHedge showed several “alternative” economicindicators such as real-time measurements of air pollution (a proxy for industrial output), daily coal consumption (a proxy for electricity usage and manufacturing) and traffic congestion levels (a proxy for commerce and mobility), before concluding that China’s economy appears to have ground to a halt.
That conclusion was cemented after looking at some other real-time charts which suggest that there is a very high probability that China’s GDP in Q1 will not only flatline, but crater deep in the red for one simple reason: there is no economic activity taking place whatsoever.
We start with China’s infrastructure and fixed asset investment, which until recently accounted for the bulk of Chinese GDP. As Goldman writes in an overnight report, in the Feb 7-13 week, steel apparent demand is down a whopping 40%, but that’s only because flat steel is down “only” 12% Y/Y as some car plants have ordered their employee to return to work (likely against their will as the epidemic still rages).
However, it is the far more important – for China’s GDP – construction steel sector where apparent demand has literally hit the bottom of the chart, down an unprecedented 88% Y/Y or as Goldman puts it, “construction steel demand is approaching zero.”
But wait, there’s more.
Courtesy of Capital Economics, which has compiled a handy breakdown of real-time China indicators, we can see the full extent of just how pervasive the crash in China’s economy has been, starting with familiar indicator, the average road congestion across 100 Chinese cities, which has collapsed into the New Year and has since failed to rebound.
Parallel to this, daily passenger traffic has also flat lined since the New Year and has yet to post an even modest rebound.
And the biggest shocker: a total collapse in passenger traffic (measured in person-km y/y % change), largely due to the quarantine that has been imposed on hundreds of millions of Chinese citizens.
And while we already noted the plunge in coal consumption in power plants as Chinese electricity use has cratered…
… what is perhaps most striking, is the devastation facing the Chinese real estate sector where property sales across 30 major cities have basically frozen.
Finally, and most ominously perhaps, as the economy craters and internal supply chains fray, prices for everyday staples such as food are soaring as China faces not only economic collapse, but also surging prices for critical goods, such as food as shown in the wholesale food price index chart below…
… which in a nation of 1.4 billion is a catastrophic mix.
As the coronavirus pandemic spreads further without containment, and as the charts above continue to flat line, so will China’s economy, which means that not only is Goldman’s draconian view of what happens to Q1 GDP likely optimistic as China now faces an outright plunge in Q1 GDP…
… but any the expectation for a V-shaped recovery in Q2 and onward will vaporize faster than a vial of ultra-biohazardaous viruses in a Wuhan virology lab.
Ending the limited quarantine and falsely proclaiming China safe for visitors and business travelers will only re-introduce the virus to workplaces and infect foreigners.
(Charles Hugh Smith) China faces an inescapably fatal dilemma: to save its economy from collapse, China’s leadership must end the quarantines soon and declare China “safe for travel and open for business” to the rest of the world.
But since 5+ million people left Wuhan to go home for New Years, dispersing throughout China, the virus has likely spread to small cities, towns and remote villages with few if any coronavirus test kits and few medical facilities to administer the tests multiple times to confirm the diagnosis. (It can take multiple tests to confirm the diagnosis, as the first test can be positive and the second test negative.)
As a result, Chinese authorities cannot possibly know how many people already have the virus in small-town / rural China or how many asymptomatic carriers caught the virus from people who left Wuhan. They also cannot possibly know how many people with symptoms are avoiding the official dragnet by hiding at home.
No data doesn’t mean no virus.
If the virus has already been dispersed throughout China by asymptomatic carriers who left Wuhan without realizing they were infected with the pathogen, then regardless of whatever official assurances may be announced in the coming days/weeks, it won’t be safe for foreigners to travel in China nor will it be safe for Chinese workers to return to factories, markets, etc.
But if China doesn’t “open for business” with unrestricted travel soon, its economy will suffer calamitous declines as fragile mountains of debt and leverage collapse and supply chain disruptions push global corporations to find permanent alternatives elsewhere.
Here’s the fatal dilemma: maintaining the quarantine long enough to truly contain it (which requires extending it to the entire country) will be fatal to China’s economy.
But ending the limited quarantine and falsely proclaiming China safe for visitors and business travelers will only re-introduce the virus to workplaces and infect foreigners who will return home as asymptomatic carriers, spreading the virus in their home nations.
Falsely declaring China safe will endanger everyone credulous enough to believe Chinese officials, and destroy whatever thin shreds of credibility China may yet have in the global economy and community. That will set off chains of causality that will destroy China’s economy just as surely as a three-month nationwide quarantine.
Who will be foolish enough to believe anything Chinese officials proclaim after foreigners who accepted the false assurances of safety return home with the coronavirus?
Air freight takes 12 to 24 hours, add another few hours for packaging, handling and last-mile delivery and that leaves 6+ days for the virus to spread to anyone who touches goods handled by an symptomatic carrier. Maybe the odds of catching the virus via surfaces are low, but maybe not. No one knows, including anyone rash enough to claim that the risk is negligible.