Survivalism & Self Sufficiency Topics > COVID-19 Coronavirus Pandemic

Economic impact of the COVID-19 coronavirus outbreak

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Mr. Bill:
CarbonBrief, 2/19/20: Analysis: Coronavirus has temporarily reduced China’s CO2 emissions by a quarter

This article is centered around CO2 emissions, but ignore that for a moment.  The interesting stuff is all the supporting data about what has happened to China's economy in the past few weeks.

--- Quote ---...Electricity demand and industrial output remain far below their usual levels across a range of indicators, many of which are at their lowest two-week average in several years. These include:

    Coal use at power stations reporting daily data at a four-year low.
    Oil refinery operating rates in Shandong province at the lowest level since 2015.
    Output of key steel product lines at the lowest level for five years.
    Levels of NO2 air pollution over China down 36% on the same period last year.
    Domestic flights are down up to 70% compared to last month.

All told, the measures to contain coronavirus have resulted in reductions of 15% to 40% in output across key industrial sectors. ...

However, the Chinese government’s coming stimulus measures in response to the disruption could outweigh these shorter-term impacts on energy and emissions, as it did after the global financial crisis and the 2015 domestic economic downturn.

Every winter, during Chinese new year, the country closes down for a week, with shops and construction sites closing and most industries winding down operations. The holiday has a significant short-term impact on energy demand, industrial output and emissions. ...

This year ... the usual fall in energy use has been prolonged by 10 days so far, with no sign of rebound. This is because the annual holiday was extended to give the government more time to get the epidemic under control – and demand has remained subdued, even after the official resumption of work on 10 February. ...

The short-term effect has been equally dramatic across a range of other industrial indicators...

Strikingly, all indicators of industrial capacity utilisation – coal power plants, blast furnaces, coking, steel products, refineries – deteriorated further in the week commencing 10 February, when business was officially expected to resume. ...

There is further confirmation of the reduction in fossil-fuel use in satellite measurements of NO2, an air pollutant closely associated with fossil-fuel burning. In the week after the 2020 Chinese new year holiday, average levels were 36% lower over China than in the same period in 2019...
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See the article for graphs, satellite imagery, and lots of economic analysis.

The Economics will trickle out to the rest of us.  It is not as visible yet as ships that left port in China are just now getting to harbor.  As expected deliveries are missed the world will demand more and faster.  When China gets back into full production, my sources is a lot of companies should be near full operation force this next week, There customers will be demanding that materials be Air freighted so that commitments will be met.  That will drive costs up or drive down availability.  Costs around the world will go up.

That all assumes that there is not an uptick in cases when people go back to work and they send people home.

I am not expecting early 2020 to be a good time economically.

David in MN:
It's very hard to get a good read on the actual economic problems. Since the Chinese usually take the New Year off one would presume some inventory is built up. We also don't know for sure what the Chinese do for inventory with respect to complete 3rd party suppliers. That said, American industry that relies on the brilliant "just in time" model to avoid inventory at any cost can be hit hard by even a slight disruption.

I've read reports from cars to food (we sell a lot of food back and forth) could be in for a supply chain problem.

There is one glimmer of hope globally... Foreign companies have been trying to move out of China for years because of the very shady government there. So there might be some mitigation on the supply side as more production in India and Central America pick up for the production loss. I know of companies that have fallback contracts for this very event.

We're going to learn some hard lessons either way. I do think this long term effects China in a very bad way as the perception will be that the government is so corrupt it either tried a cover-up or is so inept it did nothing. Both signal a lack of stability that scares away business.

Morning Sunshine:

--- Quote from: David in MN on February 21, 2020, 12:36:14 PM ---We're going to learn some hard lessons either way. I do think this long term effects China in a very bad way as the perception will be that the government is so corrupt it either tried a cover-up or is so inept it did nothing. Both signal a lack of stability that scares away business.

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WaPo:  White House struggles to contain public alarm over coronavirus

--- Quote ---Top White House economic adviser Larry Kudlow told The Washington Post late Monday that investors should consider “buying these dips” in the stock market amid the coronavirus panic. The message was to take advantage of one-day slumps and “buy low.”

After all, the Dow Jones industrial average had just fallen 1,032 points. President Trump tweeted similar guidance thousands of miles away in India.

Less than 24 hours later, the Dow Jones industrial average would fall another 879 points, bringing Trump and Kudlow’s investment advice — at least in the short term — under greater scrutiny.

The rosy sheen that Trump, Kudlow and other White House officials have tried to express about the economic impact of the coronavirus outbreak has now collided with reality: The coronavirus is spreading, quickly, to more countries. The death toll is rising, and the outbreak is wreaking havoc on global supply chains.

And the White House’s efforts to contain and control government messaging on the disease have come under attack. Trump is highly concerned about the market and has encouraged aides not to give predictions that might cause further tremors. He is expected to talk to officials Wednesday, said aides, who spoke on the condition of anonymity to discuss private conversations.
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