China’s Non-Manufacturing & Manufacturing PMIs Show to What Unfathomable Extent the Economy Has Collapsed

The charts are brutal.

By Wolf Richter for WOLF STREET.

Purchasing Managers’ Indices (PMIs) are a tally of how executives see their own company – whether business activity at their company rose or fell compared to the prior month, whether new orders rose or fell, whether they added or shed staff, etc. Executives and their companies remain unnamed. A value above 50 means expansion; a value below 50 means contraction. PMIs are an early indication of business conditions – and by extension, of the economy.

And in China, both, the PMI for the non-manufacturing sector and the PMI for the manufacturing sector, released on March 1, have collapsed to unfathomable lows, showing to what extent the measures to impede the spread of the coronavirus have shut down the economy.

Even non-manufacturing activity collapses.

The official Non-Manufacturing PMI, released by the National Bureau of Statistics, collapsed from 54.1 in January (still well into expansion mode) to a previously unthinkable low of 29.6 in February. The horizontal gray line at 50 in the chart indicates stagnation. Below 50 means contraction. Since 2007, China’s non-manufacturing sector has grown every single month. Until February:

The non-manufacturing PMI is broader than just services. It also includes the retail sector and construction. Here are some other standouts:

  • New orders plunged to 26.5, with export orders plunging to 26.8
  • Employment, which had already been in contraction in January (48.6) dropped to 37.9
  • Input prices fell to 49.3 (from 53.3)
  • Output prices fell to 43.9.
  • Confidence plunged from 59.6 in January to 40.0 in February.

Manufacturing collapses, but it’s worse than it looks.

The official China Manufacturing PMI, released by China’s National Bureau of Statistics, had already been either in the doldrums or in outright contraction for the past 14 months. In January it was at 50.0, the stagnation point. In February it collapsed to a previously unfathomable 35.7:

But it’s even worse than it looks, as the index was likely distorted to upside, due to the way a sub-index, “supplier delivery times,” is figured into the headline PMI, according to Lu Ting, chief China economist at Nomura Holdings in Hong Kong.

The headline PMI is based on a number of sub-indices. One of them is “supplier delivery times,” which accounts for 15% of the headline PMI. Normally, when supplier delivery times rise, it’s a sign of strengthening conditions in the manufacturing sector: there is a lot of demand, and suppliers are struggling to meet that demand. So longer delivery times add to the headline PMI index value.

But this time, the supplier delivery times rose because the transportation system was partially shut down, travel bans had been imposed, entire cities had been locked down, and many suppliers were shut down. With manufacturers’ supply chains cut to shreds, factories had trouble getting components and supplies.

According to Nomura’s report, if the supplier delivery times index hadn’t surged, but had remained at the same as in January, the headline PMI index would have dropped to 33.

And the sub-index for manufacturing exports orders collapsed to 28.7:

This plunge in the non-manufacturing PMI and the manufacturing PMI shows the mindboggling extent to which China’s economy has been disrupted by the coronavirus-containment methods in February.

And there is something else.

Friday evening, the homepage of the English-language website of the National Bureau of Statistics of China where I normally get the PMI data was still accessible, but the page with the data for the PMIs was not accessible and showed a “502 Bad Gateway” error. And this problem persists as I’m writing this on Saturday evening (Sunday in China). This is a screenshot:

I’m not going to over-interpret this 502 Bad Gateway issue. It’s not a rare issue on the internet. What is rare is that a major website operator, such as the Chinese government, hasn’t gotten around to fixing it after more than 24 hours!

It could be another sign of how disrupted everything is, with people that normally take care of a problem immediately not being at work, but being in quarantine, or being told not to leave their home, or being stuck in their ancestral village.

And there are likely many of these problems that would normally get fixed quickly, that now don’t get fixed because there is no one there to fix them. This particular 502 Bad Gateway issue is trivial, but many other issues that aren’t getting fixed might not be that trivial.

ANZ banking group estimated, based on migration data of workers returning to the city from their villages, that about 50% of the workers had returned to their jobs as of this weekend, but that China’s economy was operating at only 20% capacity, hampered by issues ranging from lacking parts to other workers not having returned to work. But work resumptions are rising rapidly, ANZ said, and the March PMIs are expected to bounce off those catastrophic lows.

In the US, consumer spending accounts for roughly 70% of the economy. When will the reaction by consumers to the coronavirus – dollars spent and not spent – become visible in the overall economic data? In January, American consumers in aggregate were still in hunky-dory land. Read... Has the Coronavirus Hit US Consumer Spending Yet?

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  209 comments for “China’s Non-Manufacturing & Manufacturing PMIs Show to What Unfathomable Extent the Economy Has Collapsed

  1. Paulo says:

    That Export Orders chart looks like the only one that cannot actually be faked or subjectively massaged, and it is scary.

    Meanwhile, many folks where I live are blithely going about their daily lives, not checking the news or even expressing concern. (What you don’t know…..)

    Back to the order chart. No orders=no production. Even if the virus was over tomorrow in China and all factories could return to work, not much use if there are no orders from the rest of the world. Globalism meets reality.

    • VeteranVNvet says:

      Maybe not so blithely Paulo: When I was urging my best and oldest friend, 92, to take lots of extra care with this virus last week, the reply was, “I have always known something was going to get me in spite of ”working out” constantly, etc., and it might as well be this, since it appears to act quickly.
      At 75, I kinda sorta think the same thing, especially the quick part.

      • Xabier says:

        Quite true: if untreated- maybe because of lack of intensive care facilities, etc – it is a remarkably quick and not too agonizing death.

        Far preferable to any cancer or slow degeneration through savage steps.

        • Rich says:

          It is crazy to see the graphs.. This will have an impact on US business but how much we will have to see

          Layoff / Closing List: DailyJobCuts . com

        • jc says:

          Dying alone in isolation does not seems like a good way to go.

    • Wolf Richter says:


      None of these charts look “subjectively massaged” to me. Give them another look. They’re an expression of outright horror by China’s business executives. These companies are facing an existential crisis like never before. All the charts above show that horror.

      • Shiloh1 says:

        Hi Wolf. Has the Chinese Government been directly buying shares in companies there to prop up the stock prices? For example, how can the chart of YUMC make any sense the last 2 months?

        • Wolf Richter says:

          Well, since the Chinese government owns the four largest banks, plus the largest corporate borrowers in the country, plus the central bank, etc. it can do whatever it wants to without having to do it itself.

          HNA just got taken over by the government too, no biggie. The government controls all the levers.

      • Realist says:


        I think it is the very first time I have seen economic data from China that can be trusted to be close to the (bitter) truth. Official Q2 data will be interesting to see.

      • MCH says:

        this is actually a chance for China to reset its numbers if you think about it.

        Everyone thinks the data has been massaged in the past. now might be a chance to reset, and use that to provide accuracy… and transparency…

        Haha haha… I am sure that invoked a good laugh somewhere.

        • jb says:

          Looks like a server glitch. Maybe it was hacked and the hackers put in false numbers. Covid patients will be listed as smokers, going forward.

      • Paulo says:


        I did not mean they were massaged, just that they could be. My apologies for the confusion. I was thinking about how managers feel as opposed to how many orders are on the books.

        Like I said, it is a stark bunch of data.

        • Wolf Richter says:


          I think part of the problem was the color of the line in the chart. The line was black and went straight down the chart on the right side. People here confused it with a chart frame. So now I have turned the black lines into red lines, and it’s really obvious with all three charts. So please look at the charts again. You’ll see. All three paint a horrible picture.

      • NBay says:

        Maybe a bright side to all this is more serious attention worldwide to the bigger existential crisis when this minor one is over?

        One can hope.

    • Retfgr says:

      What do you expect do, run and the streets? That is life deal with it.

      • Alberta says:

        Wuhan citizens were locked into their homes,

        so, no,

        I don’t expect there is much running into the streets.

        • MCH says:


          Don’t know if the image will show. But it was a popular one on wechat almost a month ago. It said, go out and we will break your legs, open your mouth, we will break your teeth.

    • Mark says:

      Look at the air pollution data over China’s industrial centers, or electricity consumption, or traffic congestion…

      Way down and not coming back.

      Don’t expect a lot of “stiff upper lip” behavior from the average American once it comes here.

      • Fernando says:

        The NASA image over china to what concerns pollution is startling:

      • Stephen says:

        Poverty was not that long ago in China. Their prosperity (if you want to call it that) has been relatively recent. America has had 4-5 generations of ‘relative’ prosperity. That is the rub. You may need ammo if this thing get going here in America. Remember, many people here in America want to redistribute your wealth, and take your home and guns. Some people think everything should be ‘free’ because they have ‘rights’.

        • David Calder says:

          This article is about the Chinese economy and the COVID-19 virus.

        • china boy says:

          China is one big homogeneous family, the USA is not.

          HK just gave every citizen 10k HKD, China will do the same, when it is needed, now they want people to stay home

          In China you don’t go bankrupt seeking medical care or a ‘test’, in USA you don’t go to the hospital unless you want to lose your life savings, and/or your living on the street in which case, they can’t get blood from a rock, but if you do have any blood ( asset/cash ) they will find it and take it all.

          The Chinese are two months ahead of the USA maybe more, they have already gradually restarted the machine, the USA was already in dire straights, me thinks that once the JIT inventory’s of ‘made in china’ stuff are kaput ( about two more weeks ) that USA ‘cargo-cult’ people will go nutz.

          I think worst of all is this test stuff, some two months ago Xi ordered 2Million ‘test kits’ in ten days, he had them in 5. In the USA nobody has ordered test-kits, because the CDC is in charge, and nobody has given them a budget, funny how that works, nobody can make or hand-out ‘test kits’ except CDC, yet they haven’t done anything, like ‘privatize’ all manufacturers and told them to produce 10M test-kits in 10 days, this is what would have happen during WW2, a different USA than today.

          In China the problem was that in early January the medical system was over-loaded, in the USA nobody goes to the hospital because they know that they will not be taken care of, unless they’re rich. ( Cash talks ).

      • Mark_2 says:

        “Look at the air pollution data… electricity consumption…traffic congestion”

        Look again, the glass is half full (maybe 1/4), if we all get used to a lower standard of living maybe that would be a good thing. How much “keepin’ up with the Jones” drives consumption? I know, I’m leaving out a lot…still.

    • sierra7 says:

      At first viewing the charts I said to myself: “What’s the big deal?” At the end of the graph line I didn’t notice anything really severe……
      I realized that the big down stroke on the right side wasn’t part of the “frame” of the graph itself!!!!
      Holy Toledo!
      What a gaff!

      • Prof. Emeritus says:

        Same here, my brain wanted to interpret that big vertical fall as a secondary axis. Then I scrolled down and saw that it actually ends in a data-dot. Scary.

        • Martok says:

          Yep – same here, the optics of the chart lead me to believe there wasn’t much of a drop – then I went back and saw the HUGE drop!!

      • Wolf Richter says:

        sierra7 and all the others, including Paulo, who had trouble with the straight black collapse-line on the right side:

        Yes, I can see that the collapse at the right side could be mistaken for the frame of the chart. So I now turned the lines in all three charts red. Should have done that from get-go. It really sticks out. Thanks.

        • Martok says:

          Wolf, good job, you always post very informative charts that put “the reality” of what the markets are doing!!

          Luckily I read further past the chart and saw what a real disaster this really is – Your key point hasn’t been read anywhere by me, except here, and is excellent analysis – Most Thanks!!

    • Deanna Johnston Clark says:

      Everybody talks about China as the final word…I want to know who the CCP reports to.

  2. panic says:

    On the West Coast, people are panic buying everything. Stores have been out of hand sanitizer, toilet paper and paper towels. People are buying water and canned food like it’s the end of the world. I have never seen a Costco with entire emptied isles. In the short term, coronavirus is stimulating the economy. Maybe it will finally stoke that inflation the Fed has been craving. It’s going to get ugly.

    • Iamafan says:

      Inflation from the store shelves = deflation in the crazy stock market.

    • John Taylor says:

      I honestly don’t think this one’s containable. Los Angeles (where I work) is an international city with a large population of homeless, some resting in the chairs just inside the front of the Bradley international terminal. The middle class renting apartments can’t afford to miss much work and still make rent. Neither of those populations will think much of mild flu-like symptoms.

      Things will stabilize and a solution will come forward, but this could be the equivalent of a modern measles or mumps outbreak that will be vaccinated in the future but won’t be directly contained.

      • Cindy Faithe says:

        John Taylor, I was recently at LAX. I was shocked to see all the homeless sitting in all the chairs. They at first blend in, but As I had to wait for my daughter to get thru customs I grabbed a coffee, sat down and realized the whole row in front of me were homeless people. Security knew all of them, keep watch on them but try finding a seat to wait, half the seats are taken by the homeless.

    • Dave Chapman says:

      panic: Costco in Federal Way, WA was a zoo. The guy doing checkout said that their sales have been double the last few days. He also said that they are sold out of toilet paper.

      • Deanna Johnston Clark says:

        Here in the Southeast coast we have been fooled so many times into maxing our credit at Home Depot and Walmart we only buy what we will always need anyway….and at the last minute, because the storms are always over hyped.
        The same people, including the CCP, over hype every thing and they report to the corporation powers who report to the global elite. Protests all over China were reaching a tipping point, mostly over incinerators and pollution making the mega cities unlivable. I’m no insider but I do love to use common sense.

  3. Álvaro says:

    This won’t be a popular opinion, but I think the world is facing its biggest crisis since World War II. 2008 will be just a joke in comparison.

    • VeteranVNvet says:

      Maybe so Alvaro, but it seems to me at this time that is only about 40% likely; on the other hand, it seems about 10-20% likely it might pull us together more as a species; and the rest is something in the middle, as IMO, we will deal with it, a vaccine will be developed IF needed, ( think SARS for which no vaccine after 17 years or so because it went away, similar MERS and likely many others.)
      Looking at what data is available, it appears 80% or so of people get this and get over it either as a bad cold or not even noticing they have it.. Older folks, especially with what is being called, ”underlying conditions,” are likely the most at risk, but we also have more experience dealing with this kind of challenge.

      • Winston says:

        The SARS-CoV-2 virus which causes COVID-19 has a best estimate Case Fatality Rate (CFR) of 2.3%, virtually identical to the 1918 flu, but that figure is with modern medicine, so without that the rate would be MUCH higher. That’s 23 times higher than the CFR for the common seasonal flu which is at about 0.1%.

        It’s Ro (how many others are infected by an infected person) best estimate right now is, coincidentally, AT LEAST 2.3, and even at that figure is higher than the 1918 flu. The Ro of seasonal flu is about 1.28.

        Neither the 1918 flu or any other pandemic flu in history spread asymptomatically (people spreading it who don’t even know they have it). This one does. So that “feel good” “80% or so of people get this and get over it either as a bad cold or not even noticing they have it” is VERY bad news to the 20% with far more serious issues from it.

        Also, just released computer modelling of the virus’ genetic sequence predicts that its HIV-like segments should cause it to latch onto and infect cells 100 to 1000 times more effectively than SARS. Modelling not yet confirmed via experimentation.

        This is VERY BAD folks and thanks to the Chinese government covering this up and allowing their massive outbreak, this WILL become one of the seasonal flu types. H1N1 (now called Type A influenza) did and it represents over 50% of cases in the US this season.

        And the US authorities are blowing smoke right now. The reason there is no massive “community spread” in the US right now is simply because they AREN’T LOOKING. Due to test kit issues, they’ve tested less than 500 people. They’ve only just now fixed the kits and are loosening the criteria for testing from “having been in China or near a confirmed case” which was ridiculously restrictive.

        The current border entry “tests” are a joke due to the aforementioned virus characteristics. Latest data also indicates a possibility that the quarantine period should be 28 days, not 14 and that some “recovered” persons may still be able to infect others.

        As a clear example that “community spread” in the US is not being adequately covered, I’ll provide the link to and provide excerpts from the very bad WA nursing home news from yesterday that is strangely getting virtually no coverage outside of WA considering its implications.

        • Álvaro says:

          Also, 2020 economy is much more interconnected and weak than 1918 economy; close a factory in China and a bunch of people in a Germany town lose their houses, cancel some flights to Italy and a bunch of people from Spain have to rely on subsidies to eat…

        • wapiti says:

          Humans have no natural predator other than disease ad killing one another. Sure we lose a few homo sapiens to other large predators but disease and war (killing our own species) are the only things even minimally keeping our population in check. 2.5% mortality rate? Give me a break. We have more than a 2.5% annual recruitment. This disease targets the old, and the unhealthy. A natural scheme of evolution. I fail to see the angst.

        • Certainly if the vaccine is no better than Windows 10, sorry I won’t be upgrading my older version flu shot.

        • Implicit says:

          The possibility of it being a man made virus, whether innocently during research towards a vaccine, or with malice of forethought as a biological weapon for an enemy, or even for population control, especially for those with compromised immune systems, and elderly with naturally weakening immune system.
          It makes one wonder, considering Wuhan has a bilogical research facility that manipulates viruses close to the site of the first known case, but not case 0.
          Two standout variables as you mentioned:
          – Asymptomatic transmission
          – corona type with an HIV RNA sequence similarity

        • Winston says:

          “This disease targets the old, and the unhealthy. A natural scheme of evolution. I fail to see the angst.”

          Here are the relative numbers of SEVERE, HOSPITALIZED cases:

          0-14: 1
          15-49: 67
          50-64: 51
          =>65: 44

          Still think it’s not potentially your problem, too? BTW, your comment is simply incredible.

        • Paulo says:


          Good comment! Very informative. On CNN this morning a medical expert stated it was 25X more lethal than our seasonal flu.

          This is quite scary, actually. Developments seem to be speeding up. I had to shake my ears around when I heard M Pence proudly state he was sending out 15 thousand testing kits this weekend. Not 15 million kits, 15 thousand. Does that sound prepared? (I didn’t think so).

        • Auld Kodjer says:

          “China will grow old before it gets rich”


      • Winston says:

        New Covid-19 death raises concerns about virus spread in nursing homes
        FEBRUARY 29, 2020…concerns-about-virus-spread-in-nursing-homes/

        Washington state reported on Saturday the first death in the U.S. from the new coronavirus, the first health care worker to be infected with the disease, and most worrying, the first known outbreak in a long-term care facility.

        At a nursing facility in Kirkland, Wash, approximately 27 of the 108 residents and 25 of the 180 staff have some symptoms, health officials said during a teleconference with the Centers for Disease Control and Prevention.

        “We are very concerned about an outbreak in a setting where there are many older people,” said Jeff Duchin, health officer for public health for Seattle and King County.

        The deceased, a man in his 50s with underlying health conditions, was not a resident of the facility, and officials have not yet found a link between his case and the outbreak in the nursing facility.


        Washington state firefighters quarantined ‘out of an abundance of caution’

        Washington state firefighters who came into contact with coronavirus patients have been quarantined “out of an abundance of caution,” a local official said Saturday. They will remain isolated for two weeks.

        Seven members of the Redmond Fire Department in King County have been removed from service, according to public health officials. Six are quarantined at home and one other at a secured facility.

        In neighboring Kirkland, also in King County, firefighters who responded to an outbreak at a nursing home are being quarantined either at home or at a facility. At least 27 patients and 25 staff members at the Life Care Center have symptoms associated with COVID-19, according to local health officials.

        Kirkland officials did not say how many firefighters there are being quarantined.

    • Roger Lagerfeldt says:

      The superdebts still has to be paid even with corona virus….

      • A says:

        At this point we need to start asking if this will be worse than 2008/2009.

        That recession in 08 was man-made. It seems a biological diaster might be worse than a man-made disaster.

      • Kasadour says:

        Suddenly we are all virologists now.

    • Wisdom Seeker says:

      World War Corona! Let’s get it on.

      We have to pull together and do whatever it takes to slow this thing down so we don’t lose millions in overwhelmed hospitals. Then we have to figure out how to immunize or cure it.

      The reinfections thing is a bit scary too, it makes it much harder to evaluate what the “new normal” will look like after the initial pandemic burns out.

      • john mosbrook says:

        Why is reinfection so scary. Have you never suffered from flu that caused you to think you might not live (no hospitalization)? I’ve had a case of flu like that several times. I’m old at 77 but workout with calisthenics and ballet exercises. I take no prescription medication and no over-the-counter medication. I’m not worried. The people who should worry are the old and the obese and people taking prescription drugs.

    • Greg says:

      It is a silly opinion based on someone who is either completely ignorant of history or 12 years old.

      • Álvaro says:

        Hi, Greg. I’m 36 years old and reading about history is my main hobby. Nice to meet you.

    • Frederick says:

      Totally agree Alvaro

    • Argus says:

      Agreed. Global economies were due to crash anyway, due to debt levels, currency debasement etc. The coronavirus is just the catalyst. I do believe things are going to get a lot worse and we’re all going to have to live as frugally as our grandparents.
      Also, let this be a wake up call to North America not to allow your pharmaceutical production (security) to leave your country.

      • rhodium says:

        Well if this is what finally did it… Longest recovery in history with record insanity and complacency taught me maybe you really do have to wait for the black swan moment. I’ll buy stocks after the crash and stay in them regardless of how stupid it gets and then just run to my keyboard like every other high strung knucklehead when the news says a meteor comes crashing down to earth in 2027 along with killer black swan aliens.

  4. Tim says:

    Given the “mandate from heaven”, the “grand bargain” and the party’s dread of urban discontent, this really isn’t looking good.

    Do they just have to ditch the virus precautions and just try to get people back to work? Advance enough liquidity for firms to carry on paying everyone? Suspend companies’ debt service obligations?

    And what’s happening to food supply and prices?

    • Álvaro says:

      Look how well is doing for Iran the “just ignore the virus” policy.

      • Tim says:


        So what are we to make of Chinese stats showing spread of infection tailing off?

        Not convinced, TBH.

        • Gandalf says:

          The numbers of new reported cases has started to rise again in China, latest number is 573 on Feb 29, up from 429 on Feb 28.

          Like duh, stop the quarantines, rush everybody back to work, the numbers are going to rise again.

          Inflation is coming, if not already here. The sure to come Fed rate cuts will just spur inflation to hyperinflation levels

          All the giant corporate debt will collapse as nobody will want to refi a company whose revenue is collapsing. The debt bomb is set to explode

        • Argus says:

          Indeed, controlling the message is not the same as controlling the virus.

      • Lance Manly says:

        Or our, “we don’t test, so we don’t have it” policy

        • VeteranVNvet says:

          That IS truly amazing Lance. FL says they have NO test kits; CA says they are monitoring 8500 and have 200 test kits; not seeing kits available is very very bad, for sure.
          Just told someone on their way to cashier work to ”assume” it’s already here, everywhere in USA that has any international visitors, and circulating, so increase the normal practices as much as possible.

        • Álvaro says:

          I am from Spain and we are putting into practice that same policy.

        • Tim says:


          Me too – and what’s going to happen to our tourist industry?

  5. RD Blakeslee says:

    Like Paulo, I have relatives who contradict my way of going.

    Two now say: “The Woo-woo! halobug is overblown, mostly horrible politics.”

    I love these folks and there’s no need to challenge them. I say: “We’ll see, won’t we?”.

    • Paulo says:


      I just emailed my sister in Maui and suggested she come home. I told her if I didn’t care I wouldn’t say anything. There is now panic buying in grocery stores, her State (WA) has declared a state of emergency, and the spread is now community based of unknown origins. They don’t call jets, germ tubes for nothing. They don’t even get cleaned between trips, let alone offer safe air to breathe or no-contact seating. She left for Hawaii last Wednesday and she should have stayed home.

      • Bet says:

        Just came back from sequim Costco wa. Nonpanic. But out of hand sanitizers. We been stocking up all week. We ready for weeks of hunkering down. Kirkland Costco
        Was crazy I heard. My fear. Getting the meds I need And my 89 yr old mother in a facility in town. Sitting ducks Mother Nature pissed off and we are going to pay

  6. TonTon says:

    On the outskirts of Shanghai, today, Sunday. Restaurants, shops, barbers, traffic, pedestrians operating at roughly 80% of a regular Sunday before the virus news. Of course, Sunday is a very different day to a weekday, and Monday through Friday will look very different from normal but it is uncannily normal today.

    • Iamafan says:

      My brother left for Southeast Asia before the virus outbreak news hit.
      He is a regular commuter.
      He confirms this same thing.
      He calls me every other day and tells me everything is “dead” and not moving where he is.
      And he is in the EV industry.

  7. Iamafan says:

    I asked this question weeks ago.
    I’ll ask it again.
    When will De-Leveraging begin, if it hasn’t already started.
    Me thinks it will be FORCED.

    • Tim says:

      And are we still expecting something from the Fed and other CBs ahead of tomorrow’s market opening?

      • Shiloh1 says:

        Ah, looking forward to reruns of Sunday Night “Shock & Awe” Theater from 12 years ago!

      • DawnsEarlyLight says:

        And what ‘real’ effects would the FED cutting rates have in an already very low rate environment? This country is all ‘smoke and mirrors’.

    • Tim says:

      Worth noting that, between 2008 and 2018, China doubled its GDP (+115%) by almost quadrupling its debt (+290%). (Numbers in constant 2018 RMB).

      The biggest chunk of all that extra debt was corporates, not govt. or h/hold.

      How’s that going to be deleveraged, I wonder?

      • Iamafan says:

        Debt restructuring, default, bankruptcy. I am old enough to have seen this happen. When I was a kid, my mom took me to a bond holder’s default meeting. They were a TOYOTA representative. I remember visiting a friend (he’s dead now) in his office in Manhattan and he was working for Shearson (AMEX) when Mexico defaulted. I’m on Medicare now. That long ago. Rinse and Repeat.

        • The family story goes, the banker went to my grandparents house and told them their account was getting ten cents on the dollar. (I later asked my parents, do you suppose it was a different amount at each house he visited?). There were a few stores in town, which remained open, and I get it, the town would have died. No public meeting, everyone trusted everyone else. While some have a blind trust in the stock market today, 100 years ago they trusted their neighbor, their local banker, the miller, the merchants. The difficulty with populist politicians is that when you lose faith in the person, you lose faith in the institution. FDR used that faith in our neighbors to expand the government safety net. (FDR had credibility issues but he could build on that underlying trust.) Now of course we do not trust our neighbors, Red vs Blue. No reason stocks should not go a lot lower, but that is the last scrap of hope people have to cling too, they no longer have each other.

        • Suzie Alcatrez says:

          Grandfather told me when he was a small boy in rural Minnesota during the great depression after the banks all failed, his friend, a bankers son, showed him stacks of bills hidden in the outhouse.

        • HowNow says:

          Personally, I feel the trust was lost when our top leaders were found to be lying, and lying about critically important matters. Nixon, Clinton, Carter, W (and Cheney), Reagan (the Contra coverup) and now we have a pathological liar. POTUS has a cult following, so truth and trust don’t matter to the devotees.
          When I worked in corporations and learned that high level, gnarled, old male executives were hitting on young newbie’s because they could, that fits here as well.
          “Fish rot from the head down”.
          I don’t think I’ve ever “re=trusted” anyone in my life.

      • john mosbrook says:

        Corporations in China are the government. Of 42 largest corporations in China 41 have only one customer–CCP, The other corp. actually has a few international clients.

    • If you take those three examples to heart you might suppose it will happen in the currency markets. While the dollar was higher, EM currencies dropped, the spread raises some issues, with dollar denominated sovereign debt. If finding those dollars was tough before this, what about now? Offshore derivatives on US dollar currency hedges just go more expensive. While the selling gets ahead of the deleveraging, the system may freeze. On Friday they got to keep their 80 pt SPX pop, volatility manifests itself near market tops, not bottoms.

  8. timbers says:

    Stocks and Wall Street aren’t responsible for the flu.

    The Fed knows this.

    That’s why the Fed should cut rates, launch more QE, and a coordinated central bank response.

    The rich are suffering. Suffering.

    Why should stocks, banks, Wall Street and the super rich lose 1 single penny over something that’s not their fault? Privatized profits for the rich, socialized expenses of rich to be paid for by you and me.

    And those 40 million Americans with no access to healthcare can be quite and go to the emergency rooms (preferably the ones owned and operated by hedge funds) if they get and hold their noses over the possible $20,000 medical bills they might get, because they should just be thankful that America has the most prepared, most awesomest healthcare in the whole entire world (for the rich).

    • Unamused says:

      That’s why the Fed should cut rates, launch more QE, and a coordinated central bank response.

      You forgot tax cuts. Those are very important.

      You’ve been assured that everything is under control, so don’t worry about it.

    • DawnsEarlyLight says:

      Nice! My daily injection of sarcasm in one shot!

  9. DR DOOM says:

    502 error, good night and good luck?

    • Implicit says:

      I get that error sometimes when using Tor Browser, for instance with the World futures indices at Forex pros

  10. Wisdom Seeker says:

    3 words: pent up demand


    Looks like China, South Korea and Italy will be the test cases for how a society can successfully balance two competing needs: (1) the need to keep the virus infection rate within the treatment-capacity of the medical-care system, and (2) the need to keep people working productively so the nation doesn’t descend into mass poverty and chaos.

    It could be a long-term project since the vaccine / cure thing is still R&D.

    Might invest in telecommuting, distance learning and online meetings services. Divest from sports arenas and convention centers.

    We’ll also need physical reconfiguration of workplaces, to create isolation zones. Want to reduce the impact of finding an infected person in one part of a building or factory. Don’t want to have to close the entire establishment for testing of workers and disinfection of equipment.

    Good news is we’ll probably take down the influenza attack rate each year as well. Data from Hong Kong already showing that corona protections are reducing influenza rates.

    • RD Blakeslee says:

      Individual protection in the form of self-imposed isolation is effective against all community diseases. Unfortunately, most cannot afford to do that.

      • Unamused says:

        We’re just going to close the gates and watch the show.

        Our strategy to distance ourselves from the rigged economy and the FIC has some very positive side effects.

    • Iamafan says:

      I have a pent up demand for toilet paper and masks. The rest can wait or I have forgotten about them.

      But I will certainly count my cash.

      • TXRancher says:

        Woodcraft had a sales add today that had N95 masks for $5.99.
        Available to ship in October 2020. Haha.

    • Greg Hamilton says:

      If you want to see how South Korea will handle this just watch the South Korean movie “Flu.” It’s much better than “Contagion” or “Resident Evil.” I strongly recommend it. The movie “Flu” might be a little too optimistic for my friend Unamused however.

  11. historicus says:

    History is rife with examples of societies being shocked back to reality.
    This country has been in la la land for quite a while…and I refer not only to over accommodative central banks, the automatic “be long” money tree, but the consternation over gender issues, political correctness, false racial accusations and orchestrated fake hate events.
    History may not repeat, but it often rhymes.

    • Álvaro says:

      You can’t QE a virus until it dissappears, you can’t unfollow it from Facebook, you can’t censor it… It’s a XIX century problem in a XXI century society.

    • Unamused says:

      History is rife with examples of societies being shocked back to reality.

      History lurches from one crisis to another. Hardly anybody can do anything about it, and those who could try not to let them go to waste.

  12. Tankster says:

    Wolf, reminds me of how one of Hemingway’s characters described going bankrupt:”Gradually….then suddenly…” Off the cliff they go!

  13. Why did 50% of China’s workforce go back to work? Is the epidemic over? Are they tired of starving in their apartments? Did the government order them? We here in the US value human life snk:) and even an anecdotal number of deaths will alter the political landscape. I know someone who died of the flu after being vaccinated with the 10% effective serum. That was during this administration by the way.

    • Álvaro says:

      > Why did 50% of China’s workforce go back to work?

      Rumour says it’s just propaganda. Check out car traffic in Tom Tom:

      • Iamafan says:

        Nice link. Than you.
        It’s incredibly lonely in the roads of Wuhan.

      • Wolf Richter says:

        That link was for the city of Wuhan. Sure, hardly anyone went back to work in Wuhan.

        But China is a lot bigger than just Wuhan. Wuhan isn’t even the biggest city in China, far from it. China has 1.4 billion people. The work stoppages had impacted most of China. And now in those parts of China, people are gradually trying to get back to work. That 50% figure having returned to work was for ALL OF CHINA, not the city of Wuhan.

  14. Tony says:

    “Control fear and you control the population”

    There’s a video going around of an old Italian man in Italy trying to buy pasta at the store.

    “Mama Mia! Why are people buying all the pasta?! Even world war II didnt have people panicking this much. What’s wrong with people?”

    • MC01 says:

      I went to buy some vegetables yesterday. No queues, no panic buying, well stocked shelves.
      I live in Northern Italy about 80 miles from the epicenter of the contagion as the crow flies.

      I am completely convinced this stuff has been blown out of all proportions for purely economic reasons: on one side it allows masking how bad the slump in manufacturing was getting. On the other it allows the usual suspects to demand for “more”: lower rates, more liquidity, tax cuts etc. Nobody really cares how dangerous Covid-19 is or how many people may be affected: all it matters is “the economy”.

      Yes, there are a lot of really nasty illnesses out there: two months ago there was an outbreak of bacterial meningitis about 15 miles from here.
      The local media lost any interest the second the government in Rome said they had everything under control and there was no need for “extraordinary measures”, as in “tax cuts” and “incentives”.
      That’s all that matters.

      • HowNow says:

        George H. went from a 92% approval rating (end of 1st Gulf War) to being tossed from office when he realized a tax hike was required in ’92.

  15. Kay says:

    Wolf, lemme ask u?

    You know alot and u been around. How bad will this be? World economy, stocks?. 1929? 2008?

    • Wolf Richter says:

      Locking down entire cities, the way China has done, and ending production as we know it for about a month for 70% of the economy, is an extreme measure. I don’t think we will see this anywhere else. Even in China, people are starting to go back to work. So I don’t think we will see the plunge in production in China in February replicated in March, or replicated anywhere else. But I do see a recession in the US this year.

      • john mosbrook says:

        A China-style lockdown/quarantine is impossible in a population possessing AK-47s. If the Chinese people had guns the CCP police goons and military people would litter the street with their bodies.

  16. doug says:

    I have stated before how much I enjoy my mug, but maybe its wrong?

    those are some pretty straight vertical lines…
    Thanks for all you do.

  17. Álvaro says:

    Wolf, in case you didn’t know, you can see real time traffic data on the TomTom site. It’s a good indicator of economic activity:

    • Wolf Richter says:

      That link was for the city of Wuhan. Sure, hardly anyone went back to work in Wuhan.

      But China is a lot bigger than just Wuhan. Wuhan isn’t even the biggest city in China, far from it. China has 1.4 billion people. The work stoppages had impacted most of China. And now in those parts of China, people are gradually trying to get back to work. That 50% figure having returned to work was for ALL OF CHINA, not the city of Wuhan.

      • Álvaro says:

        You can view traffic in most major Chinese cities. I just linked Wuhan as an example.

        • Wolf Richter says:


          Yes, but in your comment above, you used that link of Wuhan to generalize for the entire Chinese economy. And that’s BS because traffic patterns for many cities, including Beijing as Gandalf pointed out here are rising, showing increased driving.

          This is what you said above:

          “Why did 50% of China’s workforce go back to work? Rumour says it’s just propaganda. Check out car traffic in Tom Tom:”

          And that’s total BS because in many cities other than Wuhan, traffic patters are rising.

  18. NARmageddon says:

    @Iamafan and others above: I think de-leveraging or deleveraging is just a weasel phrase that really means DEFAULTING.

    The DL-word was bandied about a lot around 2008-2009, and assigned the meaning that debtors (people or corporations) were somehow rushing to pay back their debt. But I don’t think paying back is what happened. I think there were mass defaults, and much of the dips in various FRED debt charts were just lenders writing off bad debts.

    I am open to being wrong. Anyone have any real data? I can see how margin borrowers in the stock market might “deleverage” by selling their shares and taking losses. That would be a real case of de-leveraging. But I don’t foresee corporations paying off bonds, consumers doing early
    repayments of auto loans, nor paying off their credit card balances. If debtors had the money, they mostly would not have these debts in the first place. Am I wrong?

    • Tim says:

      Zombies are part of this equation, I think.

      If a corporate borrower can’t keep servicing debts, the lender can classify the loan as ‘non-performing’. But that means write-downs, losses, impaired ratios, etc.. In worst cases, the bank could fail.

      So what they often do is lend the money to pay the interest, adding this to the o/s capital amount. ZIRP made that easier to do, of course. Technically, the loan is still ‘performing’.

      Europe has a particularly large zombie population.

      • sierra7 says:

        “massive deleveraging”
        Isn’t that why the “mark to market” rules were trashed in early 2009? To stem the hemorrhaging of “de-leveraging”/defaults and attempt to put a “floor” under the banks’ and financial firms increasingly reeking manure pile????
        It’s interesting to not the the DOW almost immediately began it’s climb to the stratosphere!

    • NARmageddon says:

      The article in Wikpedia on the topic of deleveraging is pretty good. One of the four modes of deleveraging is the “massive defaults” mode, it says.

      “Belt-tightening”: this is the most common path of deleveraging for an economy. In order to increase net savings, an economy reduces spending and goes through a prolonged period of austerity.

      “High inflation”: high inflation mechanically increases nominal GDP growth, thus reducing the debt to GDP ratio. E.g. Chile in 1984–91.

      “Massive default”: this usually comes after a severe currency crisis. Stock of debt immediately decreases after massive private and public sector defaults.

      “Growing out of debt”: if an economy experiences rapid (off-trend) real GDP growth, then its debt to GDP ratio will decrease naturally. E.g. US in 1938–43.

    • Iamafan says:

      No, I don’t think you are wrong but no one would admit default unless they are forced to.
      Besides if there is a CDS on the entity, then it’s a different story.

  19. Realist says:

    I did order equipment that we’ll need later this year a few weeks ago, long before I ordinarily would have done it after studying my tea leaves, wetting my forefinger in the air and reading more or less obscure financial sites like WS and others. I’m happy I did it, because the shipment is apparently getting through. Time will tell the effect the virus will have on supply chains and the markets, maybe this is a black swan or not, we’ll see. Supply is already scr**ed up quite badly due to the Chinese shutting things down, thus the situation at home will weaken in a few weeks, I think.

    I don’t worry about the stock market yet, it was badly in need of a major correction and in my eyes the market is still in correction territory.

    It would be interesting to know the extent that algos and marign calls have already affected the downturn of the stock market. I suppose there are day traders that have been handed some nice but bitter lessons already and most stock brokers are too young to have experienced something like ´08, new territory for those people indeed.

    The next few weeks will probably tell how bad the virus will turn out to be, strange that there are almost no reports concerning kids that have caught it and if you can trust the reports, it seems that elderly and people with some medical condition already are the ones that are hit the hardest. Time will tell.

    I’m satisfied I have some stockpiles in case of larger blackouts or really bad weather. This means I can sit things out if the authorities end up doing the same as the Chinese do, ie shutting the place down.

  20. unit72 says:

    I took a look at the FDA list of medicines in short supply today and not being a pharmacist don’t really know what to make of it.

    The drugs I recognized in short supply like epenephrine pens, morphine sulfate and fentanyl citrate would indicate its not a good time to have cancer, allergies or anything that hurts really bad!

  21. Mr. Knoss says:

    The right side of the V will be epic.

    • Wolf Richter says:

      Yes, since this is a month-to-month measure. How is this month compared to last month? In March it might be better than February — and at least some of the measures, if they’re doing better in March than in February, they’re going to be above 50. This means growth from February’s catastrophic levels, but still near catastrophic levels.

  22. Memento mori says:

    There was an article on NYT today about how the hospital sent a large medical bill to a patient kept at the hospital on Coronavirus Fears with the care mandated by the government.
    If this things goes on, people will avoid being tested, the virus spread will be brutal.

    • Escierto says:

      I was in Hong Kong until January 8 of this year and after I came back, a few weeks later I had a terrible cold that went to my chest causing severe congestion. I have often wondered if it was coronavirus but I never went to the doctor. I am fine now but it was rough for a few weeks. In the US very few people will go to the doctor so expect a wave of infection bigger than China.

  23. Michael Engel says:

    1) Sycophant Xi, with tears in his eyes, use his PMI to
    prove how vicious US stomp and abuse the People of China.
    2) Fickle wall street bond traders, with tears in their eyes,
    cry and beg the Fed for a quarter on March. The Fed chair use a face mask to protect himself from wall street stench.
    3) There is no vaccine from climate change, the world will be flooded next week.
    4) There is no vaccine from ME. Europe will be flooded with new shoppers in the next Xmas season.
    5) The DOW might do a 5Y parabola up, starting on Jan 2018.

    • Deanna Johnston Clark says:

      What scares me is that all these reckless loans will actually have to be repaid…no bomb, no germ, no ocean rising, no forgiveness, no helicopter $$…just slog till they drop in harness.

      I never believed my generation saying “Don’t worry…charge another vacation…we’ll never have to pay it back because of the bomb.” That was 60 years ago.

  24. Kasadour says:

    These numbers (PMI, EPMI) are shocking to say the least. It really shows just how fragile the economy is, and how fast it can fall apart when
    an unexpected calamity hits.

    I think China will come back from this at some point, mainly because the Chinese govt is- let’s say, less insolvent, than the west. China has less debt, it doesn’t have to cope with disrupting four-year political cycles, China doesn’t have 100s of trillions in unfunded liabilities and its balance sheet reflects profitable state-owned enterprises as assets. However, the implications these numbers have on the developed markets that heavily rely on supply chains from China will become catastrophic in the coming weeks/months. And because the FED has very little room in which it will be able to apply its “tools”, it will have little effect, possibly no effect. In fact, another round of QE would be the last as it would no doubt send the dollar to its final resting place.

    • VeryAmused says:

      China has less debt and is less insolvent…uh what?

      Can you show me how this is so?

      • Kasadour says:

        One economic indicator in my mind is the percentage of market capitalization to GDP and for China it’s somewhere between 40% and 60% (sorry, I don’t have the exact percentage) but it’s well below 100%. However, in the US it’s well over 130%.

        China does NOT have unfunded liabilities amounting in the $100s of trillions. Chinese banks are profit centers whereas western banks are collapsing because they are not profitable in negative yielding, flat curve, tight credit spread conditions.

        I’m not saying that China doesn’t have economic problems. What I am positing is that the Chinese govt is solvent compared to the US, and because of that, it’s poised to emerge from a recession in much better economic shape than the US.

        I wish I had links and more specific data on hand to back up what I’m saying, and I apologize for that, but u get the drift. You can easily search this out on your own.

        • Gandalf says:

          I asked my friend Mr. Google – “total China debt” – and this produces a Reuters article that says total corporate, household, and government debt in China had risen to 300% of GDP in 2019.
          Best estimate I could find of similar US debt was 365% of GDP.

    • Wolf Richter says:


      China’s debt is in the provinces, including opaque entities owned by the provinces that carry the debt — what the Chinese government calls “hidden debt” — and in the corporate sector. And the debt bubble is blowing up. HNA was just taken over by the government. Here is a comparison between the US and China, expressed as percent of GDP:

      • Kasadour says:

        I’m not taking about private debt. I’m talking about the Chines govt. and what about the profitable state owned enterprises? These are listed as assets on the balance sheet and there are a lot of them and they are a profit center along with the top Chinese banks.

        I know China has its own basket case issues, but western countries are going to languish in recession or maybe even a depression while China has much more room to respond to any financial crisis that arrives on its soil.

        • Wolf Richter says:

          The central government doesn’t need to borrow a lot because the heavy lifting is done by provinces and cities. They’re the most indebted entities, and much of that debt is hidden. And the state-owned enterprises are the most indebted of any. Many of them are zombies, kept alive by a constant flow of new debt from state-owned banks.

        • john mosbrook says:

          You want to pretend China’s SOEs actually are showing a profit? These companies exist on handouts from the government. Supplying these companies with money isn’t a problem as long as China is hauling in billions in $US. But that is not the case. The dollars have stopped coming and debt climbs perpendicularly as the printing presses roll. Even the best run of the SOEs becomes a zombie company.

      • So if their corporate debt bubble wanes does that have any blow back on US high yield?

  25. Anmol says:

    China does not have less debt. Its banking sector is more or less insolvent. They make loans based on employment and production and not on repayment capacity. Debt is simply used by the state to keep the population employed.
    I think China is in for a massive banking sector collapse.

  26. Michael Engel says:

    1) There is no vaccine from the coronavirus.
    2) The biggest victim will be the SAD American diet.
    3) There must be a change of character in the way we drink and eat – coming from the TOP !! – otherwise in the next round America will get an uppercut.
    4) The coronavirus hit the old and the fragile.
    5) The first round is almost over. If you want survive, play professional. Face masks are not enough.
    6) Plan and prepare now for the next 15 rounds, otherwise ==>
    a knocked out.
    7) God food beat pharma from China 10 : 1.
    8) Let have a drink for the change !!

  27. VeryAmused says:

    The coming recession was man made as well. The virus is just accelerating, and possibly putting stank on, the inevitable.

  28. Dave Mac says:

    Thousands of infants in poor nations die from malnutrition daily, yet this hasn’t been mentioned in fearmongering mainstream media.

    I wonder why…

    • Kasadour says:

      You think COVID19 media reporting is fear mongering? Really? There isn’t ENOUGH reporting on this crisis, in my opinion.

    • Prof. Emeritus says:

      I thought you can only get infested with malnutrition in McDonalds. Wonder if they will put coronavirus on the menu as well.

    • Wolf Richter says:

      Because starving children is a constant scourge. And the novel coronavirus is new and additional scourge.

      BTW, there has been quite a bit of coverage in the mainstream media for decades about starving children. Just because you don’t read it, doesn’t mean it isn’t there.

    • Deanna Johnston Clark says:

      …those tots don’t have Capital One cards to max out at Walmart. Dave, please don’t forget the pathological cynics who run the world.

      The little people have the hearts and souls that respond with pity.

  29. cesqy says:

    Hmm…decentralization of society and self reliance will increase in the lung run. Sink or swim.

    • Social Nationalist says:

      Which is against individualism, as this causes people to tribalize.

  30. David Hall says:

    Some Chinese factories are ramping up. South Korea does not want a Wuhan style lockdown. Many CV patients do not exhibit severe symptoms.

    • Kasadour says:

      Yet. . . Apparently COVID19 comes around more than once and is much worse the second time it manifests symptoms.

  31. Michael Engel says:

    CoronaBeer with Ice will clear SF tent city.

  32. Kasadour says:

    Cull the weak? Is that how u describe folks dying from this? That sort of attitude is utterly devoid of human compassion. I just don’t get it.

  33. Lluís says:

    From the graphs I infer something seems to be going to heck in…
    a straight line?

    • Wolf Richter says:

      Watch for the bounce in March or April :-]

      • VeryAmused says:

        Right before the plunge :-(

      • Kasadour says:

        Somehow I doubt that but you never know. I think we may have reached the limits of this grand, wholly unorthodox approach to western financial expansionist monetary policy. From here on out things are certainly going to be tense either way.

        • Kasadour says:

          Oh I’m sorry you meant the EPMI/PMI out of China. I hope you’re right Mr. Richter. I really do.

      • Gandalf says:

        A couple years ago, when the Fed was raising rates, and the market started to plunge at the end of 2018, the Cboe VIX shot up over 30. I remember a poster named Wendy (I think that was the name) who said that, against her better instincts, she had bought heavily into that plunge and made a killing, or something like that, based on the idea that the ZIRP crazy Fed would eventually come around to support the stock market again.

        Haven’t seen any recent posts from Wendy (since October 2019?), wonder what she makes of this current plunge.

        She had said in that post that if the VIX goes up over 30 again that she would be buying stocks like a drunken sailor. With the VIX skyrocketing to nearly 50 this week, I wonder if she is doing just that.

        P.S., Wolf, a while back I asked about the “search” function on your website. I have since tried to use it but it doesn’t do two things that I want it to do:

        1. It does not reliably find keyword terms posted in the comments (it finds a few, but misses most). e.g., I’m pretty sure Wendy used the term “drunken sailor” in her post, but your search function doesn’t turn up that post.

        2. It cannot find the names of posters in the comment sections and list all their comments (preferably searchable by date range). Certain posters here contribute some really insightful thoughts, posting really useful links, etc., and I’d like to be able to go back and research their posts more thoroughly.

        • Wolf Richter says:


          Yes, agreed, the search function on my site is not great. For slightly more complicated searches, I use Google. For example, if I want to know what I wrote about the Fed’s action at the end of 2019, I google this phrase:

          wolfstreet fed year-end

          If that leads to too many options, I’ll refine it further, maybe something like this:

          wolfstreet fed year-end repo

          That works very well.

          Finding a commenter’s specific comment is tough because many commenters, sometimes with duplicate names, have posted many comments. So you might try to google:

          wolfstreet gandalf

          This will pull up all articles with Gandalf’s comments. Then use the search box in your browser to find Gandalf’s comment on the page. In your case, since you’re very prolific, I’d be sitting there sorting through your comments for a few days. before I’d find what I’m looking for.

          My end of the commenting software allows me to search for comments by login email (which you cannot do since emails are not public). Even then, I will get all your comments, and not a specific one.

        • Kasadour says:

          I remember Wendy. She’s smart- we had a few convos in some threads here at WS over the years. I agree with her logic.

      • Deanna Johnston Clark says:

        Fresh air and sunshine kill viruses…

  34. QQQBall says:

    I normally don’t do the shopping, but I went to the supermarket this morning at 6:30am. I bought some more rice and beans. We have plenty but I figured I would eat them anyway (vegetarian). What I noticed was that there really isn’t that much stock on the shelves. Those stocks will be gone in “60 Seconds” in a panic. Check it out on your next grocery run.

    • ExPatKiwi says:

      Noticed that at Costco this morning when picking up the weekly milk and cooked chicken. Lots more people and mountains of toilet paper and bottled water on the floor. BTW when it’s only 32f out there’s normally not a lot of demand for bottled water in the northeast.

      • BioChamp says:

        Yes, noticed the same thing in our Boston suburb Costco and local Stop and Shop. Specific items are disappearing off the shelves and the typical weekend food shopping crowds were out much earlier than normal. This will be interesting for sure…

  35. Glenn says:

    Japanese economic mastery ended abruptly @40 years ago. Chinese likewise now. What nation wants to be held hostage to unreliable supply chains for even low tech needs, much less critical and strategic needs. Americans may now see the frailty of cheap foreign goods from one country and diversify or heaven forbid, maybe figure out how to manufacture somethings at home. If so, what a boon for our country.

    • Social Nationalist says:

      Well except consumption would drop killing other jobs. There is no boon in that regard

    • Gandalf says:


      A brief reading of history will tell you that America did once manufacture everything at home, grow everything it needed at home, and even supplied the world from its vast overabundance of food, manufactured goods, and even the oil that the world needed. That period was called World War II, and continued afterwards for almost 30 years.

      That was the “Great” period of the Make America Great Again nostalgia of a certain segment of our political spectrum. And really, the only way to accomplish that would be to bomb the rest of the world to dust “Again”, as we did in WWII.

      Maybe COVID-19 will do just that, maybe not.

      History shows that the rest of the world recovered from the devastation of WWII, labor costs skyrocketed in the US, and globalization and automation of every industry forced the US into the service and consumer economy it is today.

      It’s more likely that the US will diversify its supply chains away from China (already happening pre-COVID-19 because of the trade war) to multiple other cheap labor sources and continue to automate everything that is still produced at home. That’s not going to change, and won’t necessarily mean a boom in jobs and income for ordinary Americans.

      Japan’s economy was basically overtaken by the massive shift of everything to China. The same thing happened to Taiwan, and the rest of the “Asian Tigers” of the 1980s. Cost of labor in those countries have since skyrocketed, and cheaply produce goods are not coming back to those countries.

      Africa, India, and South and Central America, if they can ever get their political acts together, look to be more likely destinations for future mult-sourced globalization.

      • Deanna Johnston Clark says:

        There used to be no cheaply produced goods at all….we saved and paid and took good care of things. People took pride in their work.

        The women’s clothes at Target are the cheapest, weedy, one size crud ever this spring. Not one button, collar, hem, seam allowance, or neck facing ANYWHERE. Just crud made by teenage slave girls while they dodge the managers touchy feelies.

        Americans have lost all sense of dignity and moral outrage.

  36. Michael Gorback says:

    I think we might need new mugs. Sometimes things do go to heck in a straight line.

  37. Charlie says:

    “Mar 1, 2020 at 1:01 pm

    > Why did 50% of China’s workforce go back to work?

    Rumour says it’s just propaganda. Check out car traffic in Tom Tom:”

    Check the date on the photo – 1-3-2020

    • Gandalf says:

      Lots of countries reverse the month and date as standard notation. 1-3-2020 is March 1, 2020 in that website

  38. Paulo says:

    Social N,

    When guys say stuff like that it is because they never think they are in the category. Like, ‘trimming the fat’ at layoff time, and you still have a job…..until you don’t.

    Kind of a nazi attitude, to be honest. Oh I get it, now your handle…… it’s just backwards.

  39. Jdog says:

    What really amuses me about this whole situation is the common belief that the Fed can somehow mitigate the effects of this pandemic by loosening monetary policy. This is a different animal that 2008, and the tools that were useful in 2008 will be useless in this situation. The reason is that in the last economic collapse, it was the banks who were in trouble, and the banks and commercial borrowers who are the ones who benefit from loose Fed policy. It does not help mainstream America directly. This crisis will effect an entirely different group, the small service based employers and their employees. The largest percentage of new jobs created since 2008 have been service sector jobs such as bartenders and food service workers. This crisis will hit restaurants, bars, entertainment, travel, and its effect will be much more severe on small business than it will be on the larger businesses that have resources to ride it out. The Fed will not bail out these small business people and their employees. The people who are too far in debt, which is the majority of Americans, are in deep water, and if their income is disrupted for a couple of weeks, they are in real trouble. Anyone who thinks that the Fed will be able to fix this as they did the 2008 crisis does not really understand the problem.

    • VeryAmused says:

      Well said.

    • Unamused says:

      Anyone who thinks that the Fed will be able to fix this as they did the 2008 crisis does not really understand the problem.

      The Fed never fixed the 2008 crisis. They’ve been in emergency mode ever since. All they were really able to do is create asset bubbles and save the banks from themselves so they could resume parasitising the Real Economy. In the meantime the banking cartel has again overreached just as they always do to get themselves in trouble.

      The Fed can’t handle another crisis on top of the one they already have. Monetary policy isn’t going to change that. The structural changes needed to resolve the 2008 crisis aren’t going to happen because that would require prohibiting numerous bank practices and unwinding bank positions based on them. Interest rate cuts could juice the stock market but won’t reopen factories in China or restore supply chains on which US firms depend.

      Meanwhile the WH can’t come up with a strategy for dealing with Covid-19 because all the people who could lead a practical response to a national emergency have quit, leaving a collection of toadies with no real governing experience. Essentially the VP’s plan is to delegate responsibility to states and localities and control the messaging so they can presuade the gullible into believing the administration has it handled. Acquiring and expanding political power is a lot easier than managing a national crisis, so they’re sticking to the only thing they know.

      Once the loan defaults start piling up the banks will be right back to where they were in 2008 until the Fed can soak up all the new trillions in toxic financial waste. Meanwhile stock futures are down some more.

      • Julius Bear says:

        Even the government is already using a trillion dollar deficit to inflate the economy. The Fed is going back 100 bp and this will blow over: out of 90.000 patients 80.000 have been in Hubei. However, Chinese data are unreliable. I don’t believe they have it under control as it is very contagious, from surfaces and weeks undetected etc. Air traffic, trade shows, it’s a real shock. For the time being, the Chinese government can force people to do whatever but they’re going to need some serious distraction.

      • Tim says:


        You’re running a business, now in lock-down, or cut off from supply lines, or both, or else your customers have simply vanished.

        You can’t make, deliver or sell your product, and revenues have dried up.

        You’ve still got wages, overheads, rent, maintenance, taxes and debt service costs you have to meet.

        How, exactly, does a small cut in your future borrowing costs, or a spike in your share price, help you NOW?

  40. Jdog says:

    It is completely different. The Fed could fix the last crisis, because it was simply a matter of re-capitalizing the banks. The banks are the Feds shareholders, so of course the Fed was going to bail them out. This crisis will effect small business primarily. A “contagion panic” will kill restaurants, bars, travel and vacation, and entertainment. These service sector jobs make up a huge percentage of the “new economy”. The Fed has no dog in this fight, and will not lift a finger to help small business America. The real problem is these small businesses and their employees have no real ability to ride this out. A few weeks with no or greatly reduced income will be too much for them to survive..

    • A says:

      Yeah like even if the FED wants to do something what does it do?

      If the central bank out $5,000 in my bank account i still wouldn’t go to a concert if there was a risk of getting a disease that would kill me.

  41. c_heale says:

    You may be one of the weak.

  42. unit472 says:

    Asian markets are modestly green (up 1% or so) and US future have followed ( except 10 year ). Hard to see why given Chinese PMI, Samsung having an virus in one of its factories, etc. I suppose there is some optimism China will go back to work until the virus reintensifies, there being no change in treatment or virulence that I have heard of.

  43. Michael Engel says:

    1) On Aug 2015 SPX plunged. In Jan & Feb 2016 lurch sharply down
    again. It was the end of Kapital in our nation capital.
    2) Young student indoctrination and reeducation in the benefit of Marxism,
    were very upset that their energetic and passionate leader was not at the helm.
    3) After 5 years, those students have already graduated and make over 100K a year.
    4) They are not going to approve an old hunchback who will confiscate
    what they make.

  44. Augusto says:

    The talking heads are talking up V-shaped recovery tonight. They’ve bid up futures in oil, stocks, currencies. Hey, it must be coming after the Chinese market is way up (with 60 percent of the country sitting at home). The Finance Community is creating narratives galore about all the liquidity central banks around the world are going to provide..interest rate cuts, even negative interest rates, stock buying by central banks, free money for hedge funds….You are going to miss out on the biggest comeback of all time….My bet is in the next couple of days Wall Street are going sucker a bunch more people back onto the decks of this Titanic. Hey get out of the water come back aboard. This Virus is really a “good” thing, all that scared money coming to American,. So its one more fleecing, taking any money or life jackets left. Then, in one big Splash, this market is going to the bottom.

    • MC01 says:

      It looks like the suckering lasted… maybe a hour. I am checking on the phone right now, but it seems the FTSE-MIB literally skyrocketed for the first hour of trading or so. Then it didn’t plunge as so much dived and is presently down over 300 points for the day. The original 200 points gain evaporated in minutes. Crazy.
      It’s simply amazing how much things changed in little over a week: we went from buying the most atrocious financial news with unbrindled enthusiasm to what I can only call complete panic. Those who guess the bottom of this thing will make a fortune.

      But perhaps the ECB can print antibodies (apologies to the inventor of the original quote) or the Italian government can run bigger deficits and issue new bonds denominated in vaccines or something. ;-)

      • Wolf Richter says:


        Holy moly, I just looked at the chart of Milan’s FTSE-MIB that you mentioned. That’s a -5.2% plunge from the top of the opening spike to the low at around 1 PM. It has bounced off that bottom a little as of this moment, but still way down.

  45. Breta says:

    This is the Meathead virus – caused by meatheads, mismanaged by meatheads.
    Have we learned anything? I don’t think so. The next meathead virus will get us if this one doesn’t…
    Swineflu, birdflu, mad cow, mers (camels), ebola, HIV – this new meathead virus from bats or pangolines? Who knows? Who cares? Gotta keep stuffin’ the meathead.

    • Xabier says:

      The nascent pandemic shines a strong light on human nature, intellect, those who govern (‘lead’) , and those who pretend to inform us.

      What it reveals is not pretty.

      We can see why Lucifer, the most beautiful of angels, refused, in the myth, to bow to God’s wonderful new creation, Mankind:

      ‘Bow to that?!’

      I mean, would you?

  46. Bobber says:

    Could people be avoiding Amazon purchases from China, which impacts Chinese exports? I heard today the experts don’t know how long the virus can last on surfaces, but one person speculated it likely lasts around 9 days, like other Coronaviruses SARS and MERS. It seems like an unlikely mode of transmission, but I won’t be ordering the same day shipping any more. I’ll go for the free 10-15 shipping to let the product air out a bit..

    • ru82 says:

      For some reason i guess US citizens don’t need to wear mask. i keep reading that every day. they say soap and water is all we need. yet i see these pictures of everyone in asia wearing masks. go figure

      Yhey say if your infected it would be good pratice to wear a mask but not mandatory. That is what i keep reading on MSN.

      i was in costco today and the only people i saw wearing mask were asian people.

  47. Gandalf says:

    Looks like the buy the dip, buy the VIX players are coming back to the market. The fascinating Tom Tom website shows that many Chinese cities, notably Zhenzhen, site of most of the world’s entire supply of cellphone components, has returned to near normal traffic on Monday, China time. Many other cities remain depressed, however, and Wuhan still seems to be totally shut down.

    We’ll see if COVID-19 makes a comeback with this re-opening of China, Inc. If it does, the buy the dippers are going to get their faces ripped off. It will be about a month before this becomes clear.

  48. Silly Me says:


    Consumer spending accounts for 70% of the economy?

    Please, clarify: what economy?

    I thought much of spending, thus the “economy,” takes place at the stock market, out of which about 90% is computer-generated. Is that also consumer spending?

  49. timbers says:

    The internets are saying all the banks are promising to fight the affects of the flu.

    We know the affects the banks are seeing is stock prices going down.

    So the banks are promising us to make stocks to up again.

    • MC01 says:

      FTSE-MIB already down over 800 points for the day after the superbounce at the opening due to Asian central banks making their usual absolutely ridiculous promises… perhaps the ECB will announce they are creating vaccines out of thin air now?

      What we need right now is the grownups to get back in charge and send the spoiled children to their rooms without dinner until they start behaving. Not holding my breath, but as the Tenth Doctor used to say “I live in hope”.

    • Unamused says:

      So the banks are promising us to make stocks to up again.

      At the least you should get a dead cat bounce or a temporary recovery on Fed assurances. But the economic shock wave hasn’t hit the US yet, and it’s sure to be a doozy.

      The virus shock wave hasn’t hit yet either. Genetic testing shows that the virus may have been spreading in the US for six weeks undetected. The lack of a robust health care system and the recent hollowing out of the responsible federal institutions are sure to come back to haunt the country. National priorities of message control and damage control over effective management have already made it worse.

      There’s a serious lack of US data for making sound risk assessments. The daily SWOT analyses we’ve been doing come with a lot of heavy uncertainties, especially with the long list of items in the T quadrant. You can be sure that the machineries of profiteering in the Medical Industrial Complex are ready to go but are likely to backfire.

  50. Winston says:

    Not back to work as of 25 Mar 2020. Via NO2 pollution monitoring:

    MARCH 2, 2020
    NASA and ESA images show fall in China pollution over virus shutdown

    • Wolf Richter says:

      1. The images you linked are as of Feb 25. This was 7 days ago!! China finished its second working of March (it’s 10:30PM March 2 in Beijing at the moment).

      2. Article above said: “…about 50% of the workers had returned to their jobs as of this weekend, but that China’s economy was operating at only 20% capacity, hampered by issues ranging from lacking parts to other workers not having returned to work.”

      20% of capacity means: people going to work doesn’t mean that they can get productive because of other issues that now have to be resolved one by one.

      • kleen says:

        I think they shut down Samsung as well in Korea? India is also having issues with production due to China’s interruptions.

        MAED: Mutually Assured Economic Destruction

  51. Iamafan says:

    The TV talking heads are too noisy. All asking for a Fed cut.
    Ah, we’ve been here before.
    Here’s what the Fed and Treasury can do. Do you remember the Treasury SFA account during the crisis?
    The Fed can do the same and call it now the Co-vid Fund. The Treasury can be assured of money to fight the virus.
    No need to change rates. The Fed cans imply buy Treasuries (regardless the term structure) and target the CASH into a new Treasury fund where it will be direly needed.

    • Divert that money into Treasury without Congress that is direct monetization, without authorization. TARP and Maiden lane would never get through this Congress.

      • Iamafan says:

        I believe Congress has given the Fed the power to do this since the GFC. Also debt ceiling has been suspended for 2 years. I do not think Pelosi and Schumer will stand in the way of Covid-19 funding. In fact they are asking for MORE. This fund can be a non-general fund and specifically targeted for spending on containing the virus and our medical preparedness.

        This is NOT for Wall Street.

        • Unamused says:

          This is NOT for Wall Street.

          No, it’ll be diverted to the southern border wall, like other federal medical preparedness funding. The CDC’s loss is Border Patrol’s gain.

          No, I would not kid you about such a thing.

  52. Gandalf says:


    I did a more in depth look at that Tom Tom site. It measures the level of traffic congestion in major cities around the world, and it is possible to compare current levels with 2019 levels.

    There are some 22 cities in China listed, plus Hong Kong, and I did a crude comparison of what traffic congestion levels are like, by city:

    Beijing – 70
    Changchun – 70-80
    Changsha – 70
    Chengdu – 100 (40)
    Chongqing – 40 (slightly improved from last week)
    Dongguan – 40 (slightly improved)
    Fuzhou – 60
    Guangzhou – 60-90
    Hangzhou – 100 (70-80)
    Nanjing – 100 (only 80-90 last week)
    Ningbo – 70-80
    Quanzhou – 30 (no change)
    Shanghai – 60-80
    Shenyang – 80-90 (50-60 last week)
    Shenzhen – 90-100 (50-80 last week)
    Shijiazhuang – 60 (40)
    Suzhou – 90-100 (50)
    Tianjin – 40-50 (<40)
    Wuhan – 10 (no change from last week)
    Wuxi – 90 (80)
    Xiamen – 80-90 (50-60)
    Zhuhai – 50-60 (40)

    Hong Kong – 40-50 (30-50)

    Last week, most of these cities in China were shut down with less than 50% or worse of their normal traffic congestion levels.

    The first set of numbers in that list are the percentage levels of what Monday March 2 traffic congestion levels were compared to 2019 levels, so they give you an idea of how much that city's activity level has returned to "normal". with 100 being essentially normal levels of traffic congestion compared to 2019.

    The second set of numbers or descriptions in parentheses are notes about how bad or not bad things were last week. Those cities without this notation had the typical <50% or worse reduction in traffic congestion.

    What is notable is how favored the northeastern cities of Shanghai, Nanjing, Hangzhou, Suzhou, and the southern city of Shenzhen have been with the initial shutdown and/or how quickly they have been revived back into normal levels of activity.

    These cities are obviously important to the trade and industry of China, but it isn't clear to me how or why some cities got revived more quickly into near normal activity whereas others remain stuck at much lower levels, especially when you consider their geographical locations. Shenzhen is right next to Dongguan, Guanzhou, and Hong Hong, and all three of the latter cities are still stuck at significantly lower levels of activity.

    Chongqing, a massive hub city in central China and a major link to the more rural regions, remains stuck at low levels of activity. Why?

    I suspect the delay in dealing with the initial infections in Wuhan in the time frame of the Chinese New Year annual migration of workers back to their rural hometowns has already led to the virus spreading to the rural regions. Healthcare in those rural regions of China is notoriously bad to non-existent, and there have been essentially zero reports of COVID-19 in the rural areas, which is almost certainly because of the poor healthcare there rather than the fact that the virus did not reach the rural regions.

    What this pattern seems to show most is that there is a haphazard and uneven application of release from the policy of trying to quarantine the COVID-19, with key cities important for China's trade and manufacturing getting a head start on the others, probably because of more aggressive local officials in those cities pushing hard to fire up the engines of commerce again.

    Wuhan, also a major manufacturing city, however, seems to have landed in a special place in hell, and remains stuck still in quarantine.

    I really, REALLY don't see how this random pattern of increasing activity works out in terms of preventing a second round of COVID-19 infections from starting up in China again.

  53. akiddy111 says:

    Bulls will win this week. Powell is staring at the S&P 500 right now and doing a wait and see. It it behaves itself today, he will wait until mid March for the virus 25bp cut.

    If it panic sells off like last week, then an emergency 50bp cut. The Fed’s actions are predictable these days.

    Trump may tweet and ridicule the guy today into doing a 50bp cut, thus pushing the narrative towards a near term 50bp.

  54. akiddy111 says:

    Oops. Just saw the S&P 500 up 1.5% a minute ago. Powell can relax. 25bp later, no hurry.

  55. CreditGB says:

    China is at the head waters of annual flu strains
    Shops closed, factories closed, public gatherings cancelled, travel cancelled, all attempts to thwart its spread. Can’t blame them or other countries for taking steps to limit the size and length of the outbreak can we ?

    So, how can anyone be surprised about the tanked economic figures?

    After this has run it’s course, lets revisit the economic activity.

  56. Iamafan says:

    Have you guys seen the inventory of Treasury notes and bonds of the Primary Dealers. Last week the total notes and bonds were the lowest for the week since 2019. It was only $176.193 billion. No wonder the Fed repo is winding down. Not too much collateral to fund there.

    T-Bills is another matter as they buy to front-run the Fed (at least till June). But even that is showing slow downs.

    I guess this means the someone(s) buying the primary dealers inventory.

  57. Iamafan says:

    Today, the 13 week T bill had a high rate of only 1.155% and the 26-week only 1.010%. Who needs a Fed Funds rate cut when the market already did it?

    • Unamused says:

      Who needs a Fed Funds rate cut when the market already did it?

      People who already have even more rate cuts already priced in.

  58. Saylor says:

    What could be a back breaker for any population would be the overwhelming of health services. A critical mass as you could have. The survival rate would climb significantly if there are not enough beds and respirators to go around. This is the somewhat hidden danger of any virus. Africa has no health infrastructure and a lot of Chinese workers. I expect round after round of crippled manufacturing output AND demand. Not so much a wack-a-mole as the grist for the mill to grind down the global market.

  59. Saylor says:

    Drop not climb. And the infection rate would climb.

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