Monday 9 March 2020

Recession incoming?

 I Know I am like a broken record now, but this is a very tough morning economically for the the world and for the UK. Don't fancy being the Chancellor trying to draw up a budget.

The Ftse is now down near 6000, having been at nearly 7500 a few short weeks ago. We started the year quite optimistically thinking getting Brexit Done and Trump pump priming the US economy ahead of an election would make for a strong year.

Now we have 3 simultaenous, but related,  crises:

1 - Supply shortages for finished goods and materials as a lag from a 3 month closure of the Chinese indsutrial heartlands.

2 - A new shock to the West as Covid-19 impacts every day life and travel with a potential for a China style shut down for a couple of months. 

3 - Saudi Arabia getting tired of the Russian approach to OPEC and decidig now is the time to start an oil war (Oil price fell 33% in one minute overnight) - just as oil demand is dropping due to lack of travel and shipping. 

Of the three above, only point one is under control with China starting to get back to work last week. The second point is on a knife edge, as the virus gets into Europe at the end of winter - so much will depend on the weather in the coming weeks.

The oil war should be a shot in the arm to the economy at a desperate time, but as we know it is good for some sectors and terrible for others.

UK Gilts are all negative now, the sign of a real crisis if there ever was one.

We still might see this as an over-reaction and there could be a fast recovery if Governments get a grip on the Virus, but there are few signs of that. UK still, after 2 weeks, had planes landing constantly from Milan for example. EU countries with their endless virtue signalling abou tinclusity and openness do seem to struggle with scenario's like this, as does the USA.

Fun week ahead


DJK said...

See AE-P today for the gloomiest prognosis (as always).

CityUnslicker said...

I can't stand him anymore - I doubt know how he has avoided suicide all these years with him being such a Cassandra about events.

DJK said...

Well to be fair, he does have something a bit more worrying to hype this time, compared to his usual doom and gloom.

Charlie said...

If I had any pension allowance left this year, I would BTFD.

Timbo614 said...

@Charlie I'm realising more cash as we speak... deciding on letting the dust settle or move now.

jim said...

Think we are over reacting. CV does not look likely to kill off large numbers, even if the UK figure topped 1000 it would be insignificant, same for most EU nations. The main danger seems to be the diversion of resources and attention to CV amply helped by the Internet. We have nothing better to do than watch images of shelves emptying and trollies being wheeled.

In former times wise heads would have played this down and few outside the medical and funeral business would be very aware of the full impact. Hospital resources would be quietly rationed and patients triaged. We can't play that game any more.

So far the UK's message handling has been quite good, we are clearly being slowly fed the message 'this is no longer contained' and we are not panicking.

This points out the lacuna in government planning worldwide, how to counter the sensationalism of 24/7 worldwide news. Calm down, we are not all going to die, this affliction will fade away naturally. The bogey man will only get a few of us. Perhaps we are too used to being the apex predator.

Anonymous said...

A E-P has predicted all 12 of the last 3 recessions.

This is like the 2008 days again. Sterling seems to be holding up well though in the reverse beauty contest.

I think I might dip into a shares ISA before TYE.

Anonymous said...

I see Rishi wants to move a chunk of HMT to Teeside. Won't do much for Middlesborough house prices, but great for Yarm and the NY Moors.

Nick Drew said...

TeesSide: it's the river TEES (b****y southerner!)

Having spent a long time up there in my Teesside Power days, see this blog passim

Yarm is indeed lovely. I recommend the Crathorne

Nick Drew said...

PS, notice how many times stockmarket meltdowns happen after big storms?

dearieme said...

If the virus is such a tame thing why did the Chinese despots close down the country for many weeks?

Nick Drew said...

Jim (and others) you need to read the Italian accounts that are circulating, mate

APL said...

"If the virus is such a tame thing why did the Chinese despots close down the country for many weeks?"

Retaliation for Trumps trade war.

They couldn't implement a trade embargo, that would be too 'aggressive'.

Being a despotic regime they can hold the West to ransom. Yet still maintain our sympathy. This is how they do it.

And, they didn't tell us ( the West ) about this edition of the Corona virus until it had got well established in China. The quarantine of a dozen cities late January. They absolutely must have know something was up in November - December timeframe.

Meantime Chinese students are travelling back an forth between Western Cities - and the Chinese government had a full blown epidemic on their hands - but said nothing.

Personally, I think its been in the UK since December. A good many people have already had it and recovered.

The BBC, of course is masturbating about influenza and driving the hysteria.

On the one hand, they are stoking fear in people with threats of month long 'house arrest' and on the other complaining about stockpiling because people have stocked up for such an eventuality.

F**k the BBC, the sooner it's closed down the better for everyone.

Anonymous said...

Not a Southerner NT (I've watched the Quakers at Feethams and remember the long gone rollerskate park in Darlington), just a careless typist. I still go back at least once a year, was there on Boxing Day. Weardale is another lovely area, I hope that city guy prospers regenerating Bishop Auckland.

Kicking myself for filling the oil tank last week.

Anonymous said...

In general, there's a much more positive attitude to stockpiling here in the US than in Blighty.

Even in normal times, the government (state and fed) recommends it. It's seen as a perfectly obvious thing to do in anticipation of a major event.

I don't know why the UK is so different. Any amount of prepping is seen as a bit nuts there. I remember reading a Sun article (I know) recently, about someone who had bought enough food to fill... gasp... his larder. In the US, pretty much everyone does that, even non-preppers. It only becomes notable once somebody has filled his garage, and only newsworthy once someone has several years' supplies in his house.


Thud said...

Infection rates nearing zero in China ( yes I believe the figures they have to much to lose in fudging again) and South Korea reporting that it seems to be coming under control there so it can be done, Europe and U.S. another matter though but we will see it through.

DJK said...

Thud: As you say, it can be beaten. In about a week's time the weather here will turn warmer and my hope is that after a modest peak, the rate of infection will start to die down. Right now in the UK we're on a similar trajectory to where Italy was about two weeks ago but I don't think it's inevitable that we'll see similar death rates, with hospitals overwhelmed. Likewise, I don't see a recession as inevitable as once victory is declared, people will go out and spend.

E-K said...

DJK - We normally have a snowy period in the run-up to Easter. It happens nearly every year.

We get caught out by it every time.

When will people realise that winter has shunted along by a couple of months. Though I suppose, with tulips and daffodils out, nature needs to be told too.

Of the CV. I'm all for letting it run its course (as though we have a choice) but the Govt is taking it a bit far - no checks, not even advice to self quarantine for arrivals from lock-down virus hot spots.

Will this country never stop whoring itself for the God of free movement and economic growth (AKA running on the spot harder and harder rather than getting richer) ?

Anonymous said...

"Will this country never stop whoring itself for the God of free movement and economic growth (AKA running on the spot harder and harder rather than getting richer) ?"

No, because while the rest are sunning, some people are getting richer.

Still, never mind about Italy, with only a 4.7% death rate - who cares, they're old after all. Come on down to the Cotswolds with your mates, it's Gold Cup Week!

Jan said...


"Personally, I think its been in the UK since December. A good many people have already had it and recovered."

I've been saying the same as I jad a flu-like thing over Christmas which was unlike any flu I've had before and quite debilitating and lasted about 3 weeks until I felt properly better.

I agree the hype is madness. They could just as easily publish the daily deaths from flu and I daresay they would be higher and also mostly old people and those with underlying health conditions.

Anonymous said...

Italy death rate at 6% after another 168 deaths yesterday.

"733 coronavirus cases requiring ICU care in Lombardy and only 660 ICU beds in Lombardy. All the other critically ill patients have nowhere to go."

A 6% death rate is way, way over the death rate (about 2%) of the 1918-19 flu outbreak that killed 20 million people.

"they could just as easily publish the daily deaths from flu and I daresay they would be higher"

In this US flu season about 40 million Americans will get flu and 20,000 will die.

40 million people with coronavirus will give you 800,000 deaths with a 2% death rate, about average for this outbreak. That's assuming enough ICU beds and not an Italy scenario.

Jan - "the hype is madness"

Arithmetic's not THAT hard, surely?

dearieme said...

"They could just as easily publish the daily deaths from flu": they can't because they don't know the number. The figures are made up afterwards with the aid of a mathematical model. They may be good, intelligent, honest estimates for all I know but they are not the equivalent of "died from stabbing".

The alternative would presumably involve testing many, many corpses for antibodies.

E-K said...

Anonymous at 8.43

That's a 6% death rate of the known minority of infected people sick enough to come to treatment. Most people with coronavirus are unknown to authorities.

10.4 million people live in Lombardy.

E-K said...

If the entire number of people infected with coronavirus were known then the percentage mortality rate would be far far lower.

Anonymous said...

"Most people with coronavirus are unknown to authorities."

E-K - if you thought you had corona-chan, would you really not ring your GP? I find it hard to believe. And I hope you'd self-isolate too.

I think it likely that in the early stages (i.e. a three weeks ago) some people with mild cases just carried on - but they'll still have been infecting others.

In China a Brit I know has it badly enough to be hospitalised. He's not even 30.

Anonymous said...

Consider this: In China tens of million had been put on lockdown and three new hospitals were built by the time the country reached the infection statistics that the United States has now. And still the reaction was universally deemed to have come too late. What gives Americans confidence that they are in a better position than China was back then? The only explanation I have heard is that America and China have different political values, but surely to expect that your values can defend you from the world is what defines a religious rather than a scientific approach to life.

E-K said...

I expect most don't realise they've had it.

E-K said...

Self isolate - yes

Tell doctor - why ???

Anonymous said...

Because it's a notifiable disease! They'll need to know who you were potentially infecting in the week before your symptoms became apparent.

Just 6 weeks ago at the end of January, there were fewer than 300 deaths inside China and none in the rest of the world.

E-K said...

I'm pretty sure most infected people in hotspots won't be doing this in an outbreak. They'll just be holing themselves up at home.

We don't really have a clue of the true numbers infected and I expect it's far higher than stated.

E-K said...
This comment has been removed by the author.
E-K said...

My bad and you are right, Anonymous.

I've just done a round robin of opinion and most of my friends are thinking like me. If the virus hits this area then the last thing we're going to be doing is hanging on an engaged phone trying to report ourselves sick "All the NHS is going to do is tell us to self isolate - we already know what to do."

We have not been thinking about the importance of the data.

All that's really getting through in the public advice is "wash your hands" not YOU ARE LEGALLY OBLIGED TO TELL US.

This now needs to be the big message.

I believe that the mortality rate is skewed by lack of self reporting. The infection rate simply has to be far higher than the official figures, going by the virulence of this strain.

This is not to make light of the situation. It's deeply unsettling.

Anonymous said...

EK - to be fair it's the doctors who are legally obliged, but it would be bad form not to give them the information.

My worry is an Italy situation - only 20% of ITU beds are free normally anyway so it wouldn't take a lot to overwhelm them. This thing seems to be about 40x as lethal as flu, it may be as infectious, and we don't have a vaccine.

The good side is that the economic damage is so vast, governments will I trust be throwing money and intelligent people at a vaccine - but it might still take a year or more, and look what's happened to Italy in 6 weeks.

My wife's got flights and a room booked for Milan in October, wonder what the situation will be by then? It's like a John Wyndham novel, he said showing his age.

Oh, the other thing is that people who've had the virus but not been hit hard may be asked to donate blood plasma, because their antibodies may save a sick person. Another good reason to let the quacks know.

E-K said...

And after all that ?

This is Covid 19. What next ? Covid 20, presumably.

This is globalisation. It has its costs.

APL said...

Anon: "I trust be throwing money and intelligent people at a vaccine - but it might still take a year or more, and look what's happened to Italy in 6 weeks."

Nope, you won't get a vaccine for this strain until after it's died out. For the same reason last years anti flu vaccine is totally useless this year.

Last years flu vaccine has had no impact on this years Cv outbreak. So perhaps we can finally lay to rest the annual flu vaccine as a vast waste of resources.

EK: This is globalisation. It has its costs.

The costs of globalisation have yet to be invoiced.

Stand by as Britan is a 'service industry' economy goes down the tubes, and the huge readjustment as associated industries don't come back. Airlines, Hotels, tours, tour-guides, cruise ships, fast food. You name it, anything to do with the tourist industry is a zero.