Just a reminder, if any were needed, that the global economy in 2019 was already awash with unprecedented levels of debt and teetering on the brink of recession (ie less than 3% growth for the totality), with protectionism on the rise, and trade, manufacturing and car sales contracting.
And now we have the coronavirus on top. Simultaneous supply and demand shocks are emanating out of China, as well as huge supply chain disruptions that can cascade in unpredictable ways.
“…the coronavirus continues to spread, and there are signs that some of the world’s top economies could slide into recession as the outbreak compounds pre-existing weaknesses.
“Take Japan: The world’s third-largest economy shrank 1.6% in the fourth quarter of 2019 as the country absorbed the effects of a sales tax hike and a powerful typhoon. It was biggest contraction compared to the previous quarter since 2014.
“Then there’s Germany. The biggest economy in Europe ground to a halt right before the coronavirus outbreak set in, dragged down by the country’s struggling factories…
“[a] number of smaller economies that are hurting, too. Hong Kong is in recession and Singapore could soon suffer a similar fate. Fourth quarter GDP data from Indonesia hit a three-year low, while Malaysia had its worst reading in a decade, he noted to clients on Friday.
“Meanwhile, engines of growth like China and India slowed in 2019… All of this brings to the fore concerns about the global economy’s ability to withstand a shock from the coronavirus.
One group of [US] consumers is doing well. They have rising incomes, and they can afford the surging home prices, the surging health-care costs, and the surging new-vehicle prices,” he wrote. ““
““There are other consumers whose incomes have not budged much. They have jobs but are living paycheck to paycheck, and not because they’re splurging but because, at their level of the economy, prices of basic goods and services have run away from them.””
Last week, the 30-year Treasury yield hit an all-time low at 1.97%. This is a major warning that the bond market is sending to us. It is telling us that growth is in free fall… “
“There are multiple signs of a weakening [US] economy here. First of all, we see that trade is coming to a standstill as freight rates have hit a new low for the decade…
“Second, the manufacturing and services PMI just went into contraction. This means that GDP is going to start contracting as well.”
Global investors are being overly complacent about downside economic risks, aggravated but not limited to the growing impact of coronavirus… “
“…they are overestimating the power of monetary and fiscal stimulus to keep the global economic party going.”
A decade-long slide in Australian interest rates is threatening to turn one of the global currency market’s most popular wagers on its head… “
“Foreign exchange traders are starting to look Down Under as a place to source cheap funds, not somewhere to invest them.”
Hong Kong is poised to see the biggest jump in more than a decade in personal bankruptcies and companies winding up this year, as individuals and firms are overwhelmed by “multiple problems” that are far worse than any crisis seen previously, according to the Hong Kong Institute of Certified Public Accountants.”“
“China postpones most important annual political assembly because of virus.”
“A survey of small- and medium-sized Chinese companies conducted this month showed that a third of respondents only had enough cash to cover fixed expenses for a month, with another third running out within two months…
““If China fails to contain the virus in the first quarter, I expect a vast number of small businesses would go under,” said Lv Changshun, an analyst at Beijing Zhonghe Yingtai Management Consultant Co.”
“It has taken a massive amount of interventions by central banks to keep economies afloat globally over the last decade, and there is rising evidence that growth is beginning to decelerate.”
““The major central banks all face similar problems, including how to deal with another economic downturn,” said an executive of one of the banks present at the G20 meeting.
““They’ve been discussing this topic for a while. It’s about time they come up with some form of conclusion,” he said on condition of anonymity due to the sensitivity of the matter.”
The two-day gathering of the Group of 20 (G20) finance chiefs ended Sunday with a commitment to mobilize all policy tools to keep the global economy on track “
“…amid increasing concerns over the ripple effects of the coronavirus shock that has left China largely idle.”
In 2019, the OECD revealed last week, OECD nation governments took their borrowing to a fresh high of $11.4tn. The Paris-based thinktank says the new figure is a cause for worry, especially when those same governments have only managed to grow their national economies at a snail’s pace over the past 10 years…“
“And those fears don’t stop at government debt. The OECD has spent the past couple of years warning about the colossal sums that corporations have borrowed.”
The last time a coronavirus outbreak hit China in 2003, the global economy emerged relatively unscathed. Now, nearly two decades later, the growth-damping effects of a similar pathogen threaten to ripple around a world transformed by China’s boom.”“
The overall global economic impact of coronvirus is set to be “bigger than the US-China trade war”, according to a report by a leading trade payments insurer.”“
“The world is nearing the “tipping point” at which the coronavirus outbreak will become an uncontrollable pandemic, experts have warned…
“Dr Bharat Pankhania, a clinical lecturer at Exeter University, told The Daily Telegraph: “It is clear that all the important ingredients for a pandemic are now present. It’s better to be honest and say it.””