Buy Your Tools Now Because The COVID-19 Epidemic Will Likely Have Major Economic Impacts

By admin On Feb 14, 2020

The spread of the infamous COVID-19 Coronavirus is having major impacts on the economy, for as China is a major center of production for a wide variety of goods, the factory shutdowns taking place right now are going to be something important to watch.

In our ongoing attempts to glean some objective insight into what is actually happening “on the ground” in the notoriously opaque China, whose economy has been hammered by the Coronavirus epidemic, yesterday we showed several “alternative” economic indicators such as real-time measurements of air pollution (a proxy for industrial output), daily coal consumption (a proxy for electricity usage and manufacturing) and traffic congestion levels (a proxy for commerce and mobility), before concluding that China’s economy appears to have ground to a halt.

That conclusion was cemented after looking at some other real-time charts which suggest that there is a very high probability that China’s GDP in Q1 will not only flatline, but crater deep in the red for one simple reason: there is no economic activity taking place whatsoever.

We start with China’s infrastructure and fixed asset investment, which until recently accounted for the bulk of Chinese GDP. As Goldman writes in an overnight report, in the Feb 7-13 week, steel apparent demand is down a whopping 40%, but that’s only because flat steel is down “only” 12% Y/Y as some car plants have ordered their employee to return to work (likely against their will as the epidemic still rages). (source)

All factories have about a six to nine month lead time, which means come about September- just in time for the US elections -the economy will start to see item shortages and price increases in many areas. The current round of already for all practical purposes difficult-to-elect candidates among the Democrats, who are openly promoting socialism, will likely pit whoever is chosen against Trump in a “Socialists v. Patriots” situation, and likely will push Trump to victory in 2020.

There are many possibilities with what could happen with China, from revolution to a serious favoring of the US in trade deals, but no matter what happens, she will emerge the loser. At best, the CCP will be able to hang on to power, albeit more dependent on the US than she currently is, as the world watches the mishandling of the virus situation.

While it may not cause a recession in the US, any disruption or rise in prices will result in China being blamed, and having no way to defend themselves, placing them in an ever weaker position.

One may want to consider stocking up on things such as tools and other “Made in China” items, as one will likely see price increases in about six to nine months.

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