Small Businesses Expect Big Increase In Real Sales

The coronavirus has done extreme damage to Chinese economic activity in Q1 as it flirts with the possibility of negative GDP growth. Just as it seemed like China was exiting this situation, a new measurement caused the number of confirmed cases to spike. On February 12th, the number of cases increased by 14,840 to 48,240. The growth rate would have fallen using the old method. The new method includes those who were “clinically diagnosed.” Unfortunately, total deaths rose by 242 to 1,310. Globally, there are over 60,300 confirmed cases and 1,369 deaths. Don’t compare total deaths to the normal flu because the normal flu doesn’t cause a country’s economy to practically shutdown.

According to GZERO, the projected negative impact from the coronavirus on Q1 GDP growth is 1.738% for Hong Kong, 0.416% for the global economy, and 0.116% for America. The -0.167% impact on German GDP growth could be enough to push it into a recession because the current forecast is for 0.7% growth in 2020 with 0.1% growth in Q1 and -0.1% growth in Q2. The center of the coronavirus is the Hubei Province (Wuhan is the capital). Hubei has a work suspension that is currently in place until February 20th.

Hubei has a 39.4% share of China’s phosphorus mining, 11.9% share in cloth, 11.6% in yarn, 7% in beverages, and 8.9% in cars. Speaking of cars, Chinese auto sales are likely to have fallen 18% in January with a 54.4% decline in new energy vehicles. The former had its 18th straight month of declines and the latter is on a 7-month streak. The China Association of Automobile Manufacturers predicted sales would fall 2% in 2020 last month. The declines will be much greater than that in Q1, bringing down the yearly total. As you can see from the chart below, daily coal consumption usually falls during the lunar new year but increases rapidly afterwards. This year, it has stayed low. According to JP Morgan, it is down 40% from its seasonal average which is near its expectation for the decline in industrial production.

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