China: Impact of the coronavirus is stark – Capital Economics

Neil Shearing, an economist at Capital Economics, counts the first evidence of the impact the coronavirus has caused in the Chinese economy which has been severe. USD/CNY is traded at 6.9804, the same level it started the year. 

Key quotes

“The past week has brought the first evidence of the economic damage caused by the coronavirus. The numbers are stark. Passenger traffic in China is down by around 60% compared to the same period around the Lunar New Year holiday last year. Property sales have collapsed. And energy consumption has failed to rebound following its usual drop over the holiday period.” 

“There are also signs that the disruption is starting to spread to neighbouring economies through supply chains. Imports to Korea from China during the first ten days of this month fell by nearly 50% y/y.” 

“We have pencilled in a fall in output of 2.5% q/q (-10% annualised) on our CAP measure in the first quarter. The more important question, however, is how quickly any lost output can be made up.”

“If workplaces reopen soon, we think activity should rebound relatively quickly with lost output recovered over the rest of this year. But a prolonged shutdown could mean lost output is never recovered.”