(What’s Left of) Our Economy: More Ridiculous Myths About Trump’s China Trade Policies

Tags

CCP Virus, China, coronavirus, COVID 19, election 2020, enforcement, exports, Hong Kong, imports, Phase One, Trade, trade war, Trump, Wuhan virus, {What's Left of) Our Economy

Time to scotch two myths that have come up recently about U.S.-China relations that are close to a class in themselves in terms of weirdness.

Myth Number One: President Trump is clinging to the “Phase One” trade deal he signed in January because he thinks its continuation is crucial to his reelection.

No less than every single reason cited is wrong. First is the suggestion that it’s a lousy deal but that Trump needs it because it’s one of the only results of his China or overall trade record that can be called an “accomplishment” to any extent.

Actually, even leaving aside Mr. Trump’s record of significant success in disentangling the U.S. economy from China’s (which admittedly isn’t universally viewed as a plus), the trade deal is undoubtedly a major success on terms every American except agents of the multinational Offshoring Lobby should cheer. As I’ve explained, it not only committed China to buying an enormous amount of U.S. goods way above and beyond what its import patterns suggested. It also contained an ingenious enforcement system likely to hold China’s feet to the fire by leaving Beijing only the option of pulling out of the entire deal if it’s dissatisfied with any U.S.actions – including new American tariffs to punish China for treaty violations.

In sharp contrast to their predecessors under pre-Trump administrations, the President’s negotiators acted like they understood that China’s heavy dependence on exporting to the U.S. market would prevent Beijing from walking away – for fear of losing any remaining access. But because the United States needs China’s market much less, a U.S. withdrawal would be a supremely credible threat.

It’s true, as so many critics have charged, that China’s promises in the Phase One deal to cease or cut back on its wide-ranging predatory trade and related practices are pretty general. But the lopsided nature of the enforcement mechanism provides a great way to solve this problem. If Washington decides that Beijing isn’t living up to even vague promises, it can retaliate however harshly it wishes. The only legal option open to China is ending the entire agreement. None of the kinds of tit-for-tat retaliations that Beijing used so skillfully to spark domestic U.S. complaints about the President’s earlier tariffs are authorized. If China tries going down this road, it would likely face even stiffer U.S. tariffs.

Slightly more reasonable – but only slightly – have been observations that Mr. Trump urgently needs the extra Chinese purchases to sustain his claim of guiding the American economy to impressive levels of prosperity. Make no mistake: The export promises specified in Phase One represent valuable, production-based growth opportunities – the more so since 40 percent of those exports were specified to be manufactures, which add so much value to the American economy, as well as create so many family wage jobs.

But the economy – including the trade-sensitive manufacturing sector – was climbing out of a soft patch by the end of last year. Now that the CCP Virus has induced a prolonged national economic shutdown, any growth boost would of course be welcome, including from exports to China. But the downturn has been so gargantuan, and so heavily concentrated in the personal services sectors, that China trade has receded far into the background for the time being. Nor will it matter much to any substantial recovery – which will mainly require a rebound in those same personal services.

But couldn’t a collapse of the Phase One deal – for whatever reason – still threaten the President’s cherished goal of a strongly rising stock market? No, and because investors also appear aware of the trade deal’s marginality to the real economy for time being – and, it seems, especially keenly. In fact, their behavior as Sino-American tensions have risen recently for all sorts of reasons (the virus, China’s apparently impending further crackdown on Hong Kong) contrasts strikingly with their reactions to the trade war’s previous ups and downs. Then, they traded – often frantically – on the resulting headlines. Since the March bottom, though, it’s been a decidedly seller’s market.

Which leads to the second myth that should be headed for the circular file – that the Chinese know they have the upper hand on the President at least during this election year, and that they’re about to use an obscure clause in the deal to get them off the import hook. I’ve always doubted that anyone outside top Chinese leadership circles has any handle on what’s going on and being thought in Chinese leadership circles.

Luckily, howeve, there’s no need for entrails-reading. What matters most of all are Chinese actions. And the record shows that Beijing has never brought up the so-called force majeure clause (see Article 7.6 at the very end of the treaty text), which could enable China to suspend promised increases of imports due to extraordinary circumstances like the virus – which continues to take a heavy toll on its own economy. Indeed, at the recent meeting of China’s rubberstamp legislature, Premier Li Keqiang, second in command to China’s supremo Xi Jinping, explicitly affirmed China’s commitment to meet its Phase One obligations. 

Because that legislature has now passed the newly proposed Hong Kong crackdown law, Mr. Trump will face the challenge of developing a response. His options are wide-ranging, and predicting them seems a thankless task. What does seem certain is that his choices will be accompanied by a new round of bizarre China policy myths.   

Making News: Podcast Now On-Line of National Radio Interview on the Virus & the Economy

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CCP Virus, China, coronavirus, COVID 19, Making News, manufacturing, Market Wrap with Moe Ansari, supply chain, Trade, Wuhan virus

I’m pleased to announce that a podcast is now on-line of an interview I did yesterday on Moe Ansari’s nationally syndicated radio show.  Click here to listen to a timely, informative session on the CCP Virus’ impact on the economy going forward, with a special focus on trade, China, and manufacturing issues.  The segment comes on at about the 23:50 mark.

And keep checking in with RealityChek for news of upcoming media appearances and other developments.

Im-Politic: How Much Did the Lockdowns Really Help?

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African Americans, CCP Virus, coronavirus, COVID 19, economy, Georgia, hospitalizations, Im-Politic, lockdowns, public health, reopening, shutdown, Virginia, Washington Post, Wuhan virus

Is it time to start putting the CCP Virus economy-reopening debate shoe on the other foot, at least when it comes to one key measure of progress or backsliding against the pandemic? More specifically, is it time to put less emphasis on finding out whether states that have reopened relatively quickly have seen their virus situations worsening, and more on whether states that closed early and/or have stayed largely closed have achieved progress that’s been any better?

This question occurred to me this morning upon reading in my Washington Post that when it comes to new infections and fatalities, Virginia has just seen record highs recently whether we’re talking about single day totals or the more informative seven-day averages. That’s striking because Virginia has been one of those states that shutdown substantially quite early, and has reopened very slowly.

So I began wondering how Virginia’s record compares with a state that reopened very early – Georgia. And the numbers clearly show that their performances over the most relevant timeframes have been…pretty comparable. Which represents new evidence that the economically devastating lockdowns have been under-performers for containing the virus’ spread.

Virginia and Georgia are particularly interesting to compare because of their similarities. The latter’s total population is estimated this year at 8.63 million while the latter’s is a not greatly bigger 10.74 million.

Both states also have relatively big populations of African-Americans – who have been among the virus’ biggest victims. Blacks represent 31.03 percent of all Georgians, and 18.81 percent of all Virginians.

That Washington Post Virginia article did mention one area of continuing improvement for the state: new hospitalizations. They’re especially important both because fears of hospitals getting overwhelmed by the pandemic were prime justifications for the original shutdown orders, and because they’re the best measures of whether the virus is being contained or not. After all, numbers or new cases seem to depend heavily on increases in testing (which naturally reveal more and more infections). And controversies over identifying genuine CCP Virus-induced deaths remain heated – in large part because methodologies vary so greatly state-by-state.

By contrast, there have been no debates over how many patients with virus symptoms have been admitted to healthcare facilities. The only uncertainties are those stemming from how promptly these facilities report their admissions to state health departments.

That kind of uncertainty is still clouding Virginia’s data. As of today, (see this link and scroll down till you see the option for hospitalization data) the state has only reported new hospitalizations through May 20, and these data are divided between confirmed cases and probably cases. (The former are the great majority, though.)

Even so, because of Virginia’s lockdown policy – which began in earnest at the end of March, began easing in phases for the state’s least populous areas in mid-May, but which largely continue for its most populous areas (those closest to the District of Columbia)– it should be among the gold standard states for virus progress if turning off most economic activity is considered crucial. (Here’s an unusually informative lockdown timeline for Virginia, Maryland, and the District.)

Its interactive hospitalization chart is a little hard to read, but it seems to show that on March 31, the seven-day moving average of new admissions stood at just under 59, and through early May (when the lockdown began to be lifted). moved up steadily to a little over 81. So they rose by just under 39 percent. By May 20, this average had decreased all the way to just under 45. In other words, daily hospitalizations dropped by a little less than 45 percent. And for the entire period, the seven-day moving average for new hospitalizations dipped by 2.34 percent.

Georgia’s lockdown began only a bit later than Maryland’s (on April 2) but serious easing began much earlier (on April 24). Indeed, Governor Brian Kemp was widely pilloried for the decision.

During its three weeks of lockdown, Georgia’s seven-day average daily hospitalization numbers went from about 80 to about 130. (The non-interactive chart below is even harder to read precisely than Virginia’s interactive graphic, but check it out for yourself below.)

This roughly 62.50 percent rise in daily hospitalizations was much higher than Virginia’s during its lockdown period Did this discrepancy mean that Georgia ended its lockdown too soon? Or was its somewhat heavier African-American population density the major difference? Search me.

Georgia’s reopening has been more aggressive than Virginia’s, and that could well explain why its seven-day average hospitalization figure remained just about flat from the start of this phase through May 22.

But I’m not entirely persuaded that the lack of improvement during this period means that Georgia’s relatively fast reopening has flopped. Because for the first three weeks of this reopening, the state’s seven-day average new hospitalization figure fell by about half – faster than Virginia’s during its slower reopening. And as the Post has reported, despite Virginia’s caution, daily (although not yet seven-day averages) have been rising recently, too.

The fairest conclusion to me seems that the hospitalization data give an edge to Virginia’s more cautious lockdown-reopening strategy, but that the edge is on the modest side. And most important, it’s far from clear that this margin justifies both the economic and healthcare costs of relatively longer and/or more thorough lockdowns.

 

 

Our So-Called Foreign Policy: Closer U.S. Taiwan Ties Must Become a Two-Way Street

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alliances, allies, CCP Virus, China, coronavirus, COVID 19, decoupling, East Asia-Pacific, foreign investment, Hong Kong, Huawei, national security, Our So-Called Foreign Policy, South Korea, Taiwan, tech, Trade, Trump, TSMC, Wuhan virus

As if its CCP Virus coverup and planned crackdown on what’s left of Hong Kong’s freedoms weren’t bad enough, China has been escalating its aggressive words and deeds throughout its East Asia/Pacific neighborhood, and one major sign has been new pressure exerted on Taiwan – which Beijing views as a breakaway province that needs to end its rebellion immediately and join the Communist People’s Republic.

This more worrisome Chinese posture understandably has sparked calls for the United States to retaliate by demonstrating stronger support for Taiwan in various ways. This impulse also seems reasonable to me. But if the Trump administration speeds up its march down this road, it handles a closer relationship with Taiwan a lot better than its predecessors for decades had handled security alliance relationships with Japan and South Korea. Specifically, it’s crucial that Taiwan share much more of the burden of resisting China’s ambitions than has long been the case.

The latest alarm bells about China’s Taiwan policies have been set off by China’s words – or, more accurately, a missing word. Although the PRC (People’s Republic of China) has never renounced using force to achieve its longstanding aim “reunifying” China (as it defines the issue), its rhetorical positions toward the island have long fluctuated between the conciliatory and the blustery. But for 40 years, when Beijing mentioned of reunification, the word “peaceful” has always preceded it.

Last Friday, though, China’s second most important leader dropped the “peaceful” – and did it at a major forum: the annual meeting of the country’s rubberstamp parliament.

So it seems clear that the China cloud over Taiwan has darkened. But U.S. steps to bolster Taiwan’s security will greatly underperform – and may actually increase the dangers posed to America by China itself – unless Washington starts demanding in return that Taiwan stop its longstanding practice of investing massively in manufacturing in China, including in high tech sectors.

Indeed, as of 2018, according to this report, the total value of Taiwanese investment in China hit $180 billion – ten times the value of Taiwan’s investment in the United States. The annual amounts have been going down, but mainly because of the Trump administration’s tariffs on China, which have made it much more difficult for any factories in China – Chinese or foreign-owned – to earn fat profits by exporting major shares of their output to the United States. Even so, such investment had reached massive proportions. Indeed, in 2017. China still attracted nearly 45 percent of all Taiwan’s outbound foreign direct investment. Moreover, so much of this investment has come in technology sectors that fears have emerged of the island hollowing out its own innovation sector – which has been so vital to Taiwan’s spectacular economic development. And of course, Taiwanese companies like contract semiconductor manufacturing giant TSMC have been major suppliers of microchips and other high tech products to Chinese tech companies like Huawei, the global leader in advanced telecommunications.

It’s important to recognize that Taiwan is hardly the only U.S. ally that’s promoted China’s economic – and therefore technological and military – development. It’s not even the biggest. (That dubious honor goes to Hong Kong, but most of this Chinese “Special Administrative Region’s” direct investment flows to China seem to be concentrated in lower-tech, labor-intensive sectors without significant national security implications.) Moreover, the United States remains complicit itself.

But even though his administration doesn’t use the word, decoupling from China does appear to be a major goal of President Trump’s. There’s certainly been a lot of it. I’m not big at all on the United States embarking on a full-fledged campaign to mobilize East Asia/Pacific countries to out-compete China for influence in the  region. Indeed, I’ve argued that disentangling the United States from China economically is vital to ensure American security and prosperity on its own merits. But if President Trump does want to go the full-court anti-China press route, what’s the point if supposed American allies aren’t all-in on decoupling asd  as well?

Our So-Called Foreign Policy: A Cheer and a Half for Trump’s New China Strategy Document

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alliances, allies, America First, CCP Virus, China, coronavirus, COVID 19, decoupling, globalism, Josh Rogin, liberal global order, Our So-Called Foreign Policy, Phase One, stock markets, technology, The National Interest, Trade, transactionalism, Trump, Washington Post, Wuhan virus

When over breakfast this morning I read Josh Rogin’s Washington Post column on the Trump administration’s new China strategy statement, I was pretty pleased. It’s been a long time since I viewed the intra-administration disagreements on the subject that its release has supposedly resolved as major problems in the China strategy overhaul that President Trump has sought, The tough and, more important, smart Phase One trade deal signed in mid-January was a convincing sign that the “doves” had been marginalized, but only one sign. The new statement itself describes many others. At the same time, the more basic agreement within Mr. Trump’s team, the better.

When I finally read the actual statement a little later, I was less pleased. It’s true that the President is both fully woke to the China threat, and that he’s reversed or overturned many of the disastrous mistakes made by his predecessors on a variety of fronts – including not only trade but technology, foreign investment, and exchange programs in particular. Moreover, the evidence is multiplying that the disaster created by the CCP Virus will lead to still tougher and, more important, still smarter measures. (A further crackdown on U.S. stock exchanges listings of Chinese entities is just one example.)

But the statement also made clear that Mr. Trump hasn’t made the clean break with previous globalist approaches to China and related aspects of American foreign policy that I’ve been advocating and that, as I’ve written, could lead to serious and needless dangers down the road. And as with much of the rest of the Trump framework, the big problem has to do with the role assigned to U.S. allies and alliances. Specifically, it’s still way too big, and not different enough from the globalist approach he’s rightly slammed verbally.

Not that “United States Strategic Approach to The People’s Republic of China” was devoid of America First-y ideas. It was great, for example, to see the administration reaffirm “Our approach is not premised on determining a particular end state for China. Rather, our goal is to protect United States vital national interests” (even though the United States keeps demanding, at least rhetorically, major structural reforms in China’s trade, technology, and other economic policies – demands I’ve explained are fruitless because of impossible monitoring and enforcement challenges).

Similarly encouraging, the top two vital interests identified: “(1) protect the American people, homeland, and way of life; (2) promote American prosperity….”

I also really liked “[T]he United States responds to the PRC’s [People’s Republic of China] actions rather than its stated commitments. Moreover, we do not cater to Beijing’s demands to create a proper ‘atmosphere’ or ‘conditions’ for dialogue. Likewise, the United States sees no value in engaging with Beijing for symbolism and pageantry; we instead demand tangible results and constructive outcomes.”

Indeed, the document adds, “We acknowledge and respond in kind to Beijing’s transactional approach with timely incentives and costs, or credible threats thereof.” This kind of transactionalism – expecting proposed foreign policy measures above all to create specific, measurable short-term benefits for the United States, rather than focusing on more ambitious steps that might turn out even better farther down the road, but whose success is far less certain – is a key tenet of America First foreign policies (as I’ve argued in the above linked National Interest article). Therefore, this explicit mention and endorsement of the term is most welcome (though it needs to be enshrined as a pillar of U.S. diplomacy elsewhere, too).

The statement’s treatment of transactionalism is closely related to its clear skepticism about another dubious globalist concept – though in this instance it’s more important for what it doesn’t say than for what it does: “[C]ompetition necessarily includes engagement with the PRC, but our engagements are selective and results-oriented, with each advancing our national interests….” I read this passage as an implicit announcement that the United States will no longer be seeking any particular kind of “relationship” with China, a gauzy goal that I’ve explained (on Twitter) creates powerful pressures to sacrifice concrete objectives in the here and now in the usually mistaken belief that the other party will feel obliged to make comparable sacrifices going forward – at some point.

And all this excellent material helps make clear why I’m so disappointed in the document’s numerous bow to globalism’s shibboleths. Two stand out in particular, and they’re so intimately intertwined as to be practically two sides of the same coin: the idea that it’s crucial for the United States to uphold something globalists (and the authors of this document) call a “rules-based international order,” and the maxim that critical building blocks of this order are America’s security alliances. The big problem from an America First standpoint with these notions? Once you buy into them, you’re back in Relationships-Uber-Alles-Land.

So I was distinctly unhappy to read passages like:

“[T]he United States does not and will not accommodate Beijing’s actions that weaken a free, open, and rules-based international order. We will continue to refute the CCP’s narrative that the United States is in strategic retreat or will shirk our international security commitments. The United States will work with our robust network of allies and likeminded partners to resist attacks on our shared norms and values, within our own governance institutions, around the world, and in international organizations.”

Indeed, the lionization of America’s international security commitments completely ignores problems that President Trump has rightly spotlighted – like flagrant defense free-riding, diplomatic fence-sitting, and trade policies that have ripped off America nearly as much as China’s. Just as thoroughly ignores problems that have largely escaped Mr. Trump’s notice – like the recent, rapidly growing nuclear war risks the United States has been running in places like the Korean peninsula and Eastern Europe precisely because its allies do so little to defend themselves. Does the Trump administration really believe it can count on these countries to help fight China if shooting starts?

Meanwhile, the similar shout-out to international organizations overlooks the administration’s warning in this very same document about the naivete of assuming that “engagement with rivals and their inclusion in international institutions and global commerce would turn them into benign actors and trustworthy partners.”

Another way to put this critique: The document pays no attention to the fundamental problem with rules-based order worship. In the last analysis, it’s never been based on adherence to rules – i.e., a consensus on what is and is not acceptable international behavior. It’s been based on a willingness of the so-called free world to allow the United States to bear most of the costs and risks of providing them with security and prosperity. Those costs and risks, however, have become unaffordable and unacceptable for the United States, and its allies have displayed no serious signs of helping carry the load.

Let’s end on a happier note: The new China document promises that the United States will judge China by its deeds and not by its words. And since despite the references to alliances and international orders, these considerations so far haven’t much inhibited the administration from hitting China ever harder, especially on the trade and technology fronts, focusing on its deeds seems like the best way to evaluate its China policy, too. 

In fact, here’s possibly the strongest proof of that pudding.  The document doesn’t once mention the aim or even the concept of “decoupling” – the notion that the United States should disengage economically from China as fast and as thoroughly as practicable.  But decoupling – indeed, big time decoupling – is exactly what’s been taking place during the age of Trump.

Im-Politic: The CCP Virus Crisis Has Become Even More of a Nursing Home Crisis

Tags

Canada, CCP Virus, coronavirus, COVID 19, Europe, Following Up, lockdown, nursing homes, reopening, seniors, shutdown, Sweden, The New York Times, United Kingdom, Wuhan virus

About three weeks ago, I posted about the degree to which total U.S. CCP Virus-related deaths were occurring in nursing homes and other special facilities for seniors. And I noted that the answer – “really big” – provided significant evidence for the idea that substantial reopenings of the U.S. economy were much more feasible than widely believed.

The reason: If the virus’ main dangers were so highly concentrated in a single, highly vulnerable, and already confined population, then by definition, such dangers to the rest of the public were considerably less serious than widely believed. Therefore, relatively low-risk populations could be permitted to reengage in normal economic activity sooner rather than later.

Three weeks later, the case for faster, wider reopenings is even stronger – along with the arguments for focusing virus containment measures on seniors, and especially those inside or outside such facilities.

For example, that previous post cited data indicating that about twenty percent of all U.S. virus deaths were taking place in elder care facilities. More recently, a comprehensive New York Times survey pegged the share at 35 percent.

Moreover, data are coming in making clear that this pattern is hardly confined to the United States. In Canada, the share has been reported at 81 percent. Across Europe, national shares are thought to be between 42 percent and 57 percent. In the United Kingdom, it’s estimated at 25 percent.

Possibly the most intriguing findings concern Sweden. That’s because its lockdown was the lightest imposed among the wealthier national economies. The overall Swedish virus death rates, however, have been right in the middle of the pack for Europe.  (See here for the latest numbers.) Yet the Swedish government has also reported that nearly half those deaths have taken place in elder care facilities.

In other words, if Sweden had its nursing home act together, its virus fatalities would have been about 185 per million people – which would have put it well behind the United States, Spain, the United Kingdom, Italy, France, Belgium, the Netherlands, and Switzerland. Sweden’s economy, unfortunately, seems unlikely to escape taking a major virus-related economic hit anyway. But the toll seems largely due to its relatively small size and as a result its relatively heavy reliance on foreign trade – not to its failure to shut down more broadly.

The United States, of course, is much less reliant on foreign trade. In theory, then, if its nursing and similar facilities get the aid they need, America’s economy can continue reopening – and even faster than at present – without running major further health risks. Indeed, as I’ve also noted previously, such reopening per se could well curb other emerging public health dangers. Moreover, as observed by the Washington Post editorial board, moving toward the Swedish model might speed up progress toward creating herd immunity in the United States. This status would mean considerable protection against the second virus wave that might arrive along with cooler weather this fall.

As always, “reopening” doesn’t mean an immediate, complete return to the pre-virus normal. And serious uncertainties continue surrounding the nursing homes data, and indeed all virus-related data. But a pattern visible in so many high income countries can’t be dismissed, either, and it should put ever more pressure on backers of slower reopenings to justify their positions.

(What’s Left of) Our Economy: A Respectable Case for Optimism?

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CCP Virus, China, consumer confidence, consumers, coronavirus, COVID 19, Federal Reserve, Jerome Powell, lockdown, recovery, reopening, restart, restaurants, retail, second wave, shutdown, social distancing, Sweden, testing, vaccines, Wuhan virus, {What's Left of) Our Economy

At the risk of being (undeservedly) tarred as a CCP Virus pollyanna, I can’t help but being struck by the some new evidence that the U.S. economy’s recovery from its pandemic-induced swoon will be faster than widely feared. In fact, I still share these fears to some degree. But I can’t ignore increasing signs to the contrary.

To be clear, this evidence has little to do with the subject of yesterday’s post. Just because data can be cited showing significant national progress in beating back the virus threat doesn’t necessarily mean that a more so-called “V-shaped” economic rebound is on the way. The same goes for the impact of this progress on the economy reopening decisions of individual U.S. states – even though the more decline seen in numbers of new cases (despite gains in testing that should be revealing much more infection), numbers of deaths, and numbers of virus-related hospitalizations, the more reopening obviously will be seen.

Nor are my views being shaped by the strong rebound seen in U.S. stock markets so far (including today so far), or by the newly bullish recovery views voiced last night on “Sixty Minutes” by Federal Reserve Chair Jerome Powell. And this post isn’t even driven by the latest news about vaccine progress (though such reports will clearly help as long as the results continue being validated).

The reason: I’ve been convinced that the key to the recovery’s strength will be Americans’ willingness to start patronizing businesses in an economy where most activity – and most income earning opportunities – depend on consumer spending. So I’ve put considerable stock in predictions that, even though all the objective conditions can show that a return to normality will be safe, too many Americans will remain too fearful to boost the economy significantly.

I also take seriously the idea that all the restrictions on visiting retail stores (including restaurants) and personal service businesses will limit their customer flow either simply by forcing them to operate substantially below capacity, or by dissuading many customers from visiting in the first place, and thereby sharply reducing impulse consuming. Further, I’m well aware that the much more modest shock administered to Americans by the Great Recession triggered by the 2007-08 financial crisis was painfully slow to wear off. (See here and here where I write about reasons for recovery pessimism.)

In addition, the experiences of other countries that started reopening earlier has reenforced consumer caution concerns. Sweden, for example, has imposed fewer economic restrictions than any other major country. But this survey by the consulting firm McKinsey & Co. reports that consumer spending has dropped significantly anyway, and may not recover for months. China claims that it’s beaten the virus and its regime has been easing factory lockdowns since February. But as of late April, retail sales were still way down.

Finally, there’s the second wave threat, which could kneecap the economy as temperatures start dropping in the fall even if summer does witness a decent bounce back toward pre-virus consuming.

So the case against a relatively quick recovery with real legs is still awfully strong.

But don’t overlook reasons for more optimism. One that’s nothing less than amazing: The piece in this morning’s Washington Post reporting that even though virus testing is now much more widely available in the United States than previously, Americans are far from rushing to capitalize on these opportunities. Even accepting the various reasons offered in this article (e.g., not enough Americans know that the situation has changed; there’s too much mistrust of medical providers in some U.S. communities, particularly African-Americans), it’s difficult at least for me to conclude anything else but that many in the United States simply aren’t concerned enough about the pandemic to take this precaution. After all, if they were panic-stricken, wouldn’t they be following every bit of news about the supply of tests with baited breath?

Perhaps more important, the more news that emerges that the CCP Virus is much less lethal than early reports suggested, the (understandably) less concerned about infection more and more Americans seem to be.    

Then there are all the reports of Americans, whether in states that have eased lockdowns more vigorously and those that haven’t, violating social distance guidelines, either by not wearing masks where they’re supposed to, or seemingly ignoring social distancing rules in public place – and indeed returning to restaurants and bars and beaches in pretty impressive numbers. These reports are anecdotal, and therefore should be viewed with lots of caution. Also, please don’t assume that I’m endorsing this behavior! But there sure seems to be a lot of it, these reports also seem related to growing evidence of the virus’ relatively modest death rates, and and as an old adage goes, when enough anecdotes appear, they become data. 

Finally are several indicators pointing to an actual, non-trivial comeback in economic activity, and for a variety of sectors. This account mentions encouraging signs from the tech sector to the automotive industry. This article presents evidence of bottoming even in hard-hit bricks and mortars retail stores and restaurants. And click here for information on the housing industry.

Of course, the references above to “bottoming” could still be entirely consistent with pessimistic predictions of a painfully slow climb back to pre-virus prosperity. But I still find myself wondering if, having seen the overpoweringly depressive effect of various official edicts literally to halt and outlaw much economic activity, Americans might experience a reasonably powerful growth effect from their withdrawal – not to mention declining fears that infection is a death sentence.

Im-Politic: Some Winning Anti-Virus Numbers

Tags

CCP Virus, coronavirus, COVID 19, Im-Politic, lockdown, reopening, shutdown, Wuhan virus

As well known by RealityChek regulars, I’m a strong believer in looking at the most detailed data possible in order to understand a development or situation best. (Just yesterday, they got a great example, in this post on the latest official figures on America’s manufacturing production.)

Sometimes, though, it’s helpful to get out of the weeds. And a loftier perspective seems necessary on the coronavirus crisis and the heated debate over how fast to open the U.S. economy. Of course, because the reopening is taking place on a state-by-state basis, and because even the earliest opening states have by no means restarted their economies all the way right away, the national picture, paradoxically, isn’t the whole picture.

All the same, because the main debate is clearly between those who would go slow (at best) on the one hand, and those who would go relatively quickly on the other, it’s unmistakably useful to review the progress (or lack of progress) made by the United States as a whole. And according to the figures below, it’s been impressive, however sluggishly it began.

Let’s start with the virus death count – of most urgent concern to everyone especially if a loved one has fallen sick. I couldn’t find a chart that could be cut and pasted here, but if you look at The New York Times tracker here, you’ll see that the seven-day average of new daily deaths (the best way to monitor trends over time) peaked on April 17 at 2,362. As of this past Friday, it stook at 1,563.  That’s a reduction of more than a third – not at all bupkis.

Now let’s look at the daily change in the numbers of reported U.S. cases.  This chart comes from the Vox.com news site, and also makes clear a steady dropoff: today: 

Now let’s look at the testing figures, which also come from Vox. Keep in mind that the number of confirmed cases will logically rise as testing increases: 

 

The clear message here is that the numbers of reported cases keep falling even as testing keeps rising. That’s hard to beat for (realistic) good news in this virus era.

Finally, here’s data straight from the U.S. Centers for Disease Control and Prevention showing the CCP Virus burden on the American healthcare system.  It presents the weekly change in the share of national emergency room visits accounted for by patients with flu-like illnesses (the blue line) and by patients with specific CCP Virus-like illnesses (the orange-y line). 

This statistic is especially important because a major original rationale for the shutdowns was to prevent virus cases from mushrooming so that the nation’s hospitals would be overwhelmed.  This chart only goes up to May 2, but those are major decreases over the preceding six weeks (which brings us back to mid-March.)     

I’m sure as heck not going to shout “Mission accomplished” when it comes to the CCP Virus crisis. And no one can forget the major uncertainties still surrounding the cases and fatalities numbers – according to various critics, on the overcount and the undercount sides.

But given the progress made so far, given the lack of evidence of any worsening of the situation in states that have reopened on the aggressive side (see, e.g., this post), and given the fearsome public health toll sure to result from prolonged national economic paralysis, it seems fair to say that at least some of the burden of proof in the shutdown-versus-restart arguments has shifted to the former. 

Following Up: Inside April’s U.S. Manufacturing Crash II

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aerospace, appliances, automotive, CCP Virus, chemicals, components, computers, coronavirus, COVID 19, durable goods, electrical equipment, electronics, fabricated metals products, Federal Reserve, Following Up, food products, healthcare goods, inflation-adjusted output, machinery, manufacturing, manufacturing output, manufacturing production, medical devices, metals, non-durable goods, paper, real growth, Wuhan virus

A little earlier today, RealityChek presented some lowlights from this morning’s Federal Reserve U.S. manufacturing production report (for April). As promised, here’s a more granular look at the results, which yield even more insights as to how the CCP Virus blow to the economy is reflecting – and probably influencing dramatically changed spending patterns.

The table below shows the findings for durable goods industries, the super-category that covers products with expected usage and shelf lives of three years or more. Included are the original March inflation-adjusted output changes, the revised March data, and the April statistics:

Wood products:                                                -4.22%       -3.15%      -9.04%

non-metallic mineral products:                        -6.56%      -6.50%     -16.26%

Primary metals:                                                -2.82%      -3.95%     -20.37%

Fabricated metal products:                               -8.28%      -4.23%     -11.33%

Machinery:                                                       -5.56%      -3.05%     -10.98%

Computer & electronic products:                     -1.89%      -1.24%      -5.02%

Electrical equip, appliances, components:       -2.24%      -2.83%      -5.99%

Motor vehicles and parts:                               -28.04%    -29.96%    -71.69%

Aerospace/miscellaneous transport equip:      -8.12%      -8.90%     -21.65%

Furniture and related products:                       -9.99%      -6.50%     -20.60%

Miscellaneous manufacturing:                        -9.94%      -7.09%       -9.05%

   (contains most of those non-pharmaceutical healthcare goods)

As in the broader category analysis from earlier today, the automotive collapse – over both March and April – stands out here, although it was joined in the double-digit neighborhood (at much lower absolute levels of course) by six of the other eleven sectors. And as predicted in last month’s post on the March Fed report, the sector that’s held up best has been the computer and electronics industry – though following surprisingly close behind is electrical equipment, appliances, and their components.

It’s also easy to see how the rapid deterioration in automotive and the miscellanous transportation category that includes aerospace (especially in April for the latter) spilled over into supplier industries like metals and fabricated metal products, and machinery.

One durable goods puzzle: the relatively fast April decrease in the miscellaneous manufacturing category, which contains non-pharmaceutical medical goods so crucial for the nation’s CCP Virus response.

The second table shows the same information for the non-durables super-category, where the virus impact has been considerably lighter. Among notable results – the sharp worsening of after-inflation output in the food sector. Although it fared relatively well, there can be little doubt that the worker safety problems in meat-packing plants, along with the cratering of big customers – mainly the restaurant and hotel businesses – played big roles.

The non-durables results also make clear that the sector that’s survived best so far has been paper. Also excelling (at least relatively speaking): the enormous chemicals sector. This industry also contains the pharmaceutical industry, although the any positive CCP Virus impact seems unlikely to date because no vaccines or treatments have been developed yet.

Food, beverage, and tobacco products:          -0.76%      -1.56%       -7.10%

Textiles:                                                        -14.05%      -6.98%     -20.72%

Apparel and leather goods:                          -16.54%    -10.31%     -24.10%

Paper:                                                            -2.04%      -0.08%        -2.58%

Printing and related activities:                    -18.18%    -10.75%      -21.16%

Petroleum and coal products:                       -5.93%      -6.56%      -18.55%

Chemicals:                                                   -1.65%      -1.50%         -5.14%

Plastics and rubber products:                      -7.60%       -4.37%       -11.03%

Other mfg (different from misc above):     -5.37%       -4.29%       -10.37% 

The virus crisis contains so many moving parts (e.g., vaccine and therapeutics progress; infection, fatality, and testing data; uneven state reopening and national social distance practicing; consumer attitudes; second wave possibilities) that extrapolating the manufacturing trends to date seems foolhardy. But tracking industry’s winners and losers as the months pass could still provide important clues as to how much further the economic woes it’s caused will continue; and when, how quickly, and how completely recovery arrives.   

(What’s Left of) Our Economy: Inside April’s U.S. Manufacturing Crash I

Tags

aircraft, auto parts, automotive, Boeing, CCP Virus, coronavirus, COVID 19, durable goods, Federal Reserve, inflation-adjusted output, manufacturing, manufacturing output, manufacturing production, non-durable goods, real growth, vehicles, Wuhan virus, {What's Left of) Our Economy

There was never any point in expecting today’s Federal Reserve manufacturing production figures (for April) to change significantly what’s known about the CCP Virus’ body blow to the American economy overall, and to industry in particular. As with the case last month, however, the details reveal a great deal about how the pandemic is changing patterns of U.S. factory output – which in turn to some extent reflect changing patterns of the spending (by both consumers and businesses) that remains the main driver of the nation’s growth (or, nowadays, contraction).

The big takeaways are that:

>The March revisions show that the virus damage to manufacturing that month was a good deal less (with inflation-adjusted output falling by 5.53 percent on month) than the 6.27 percent drop initially reported.

>The April 13.78 percent month-to-month real production was by far the biggest such decrease on record (going back to 1972) – surpassing March’s previous record.

>As with March, the steepest fall-offs in price-adjusted output came in the durable goods sector – which consists of items whose active use or shelf life is expected to be three years or greater. In March, the sequential production decrease was revised from 9.14 percent to 8.23 percent. But in April, the plunge was more than twice as great: 19.27 percent.

>The March monthly shrinkage of non-durable goods production is also now judged to be smaller than first reported – 2.64 percent rather than 3.21 percent. But in April, the rate of sequential deterioration was even faster than for durable goods, speeding up to 8.23 percent.

>Within durable goods (e.g., steel, autos, computers, industrial machinery, furniture, appliances, aircraft), the automotive sector remained by far the weakest industry. It was bad enough that March’s horrific on-month after-inflation output crash dive was thought to be even greater than first estimated (29.96 percent rather than 28.04 percent). But in April, inflation-adjusted output was down by another 71.69 percent.

>And within the automotive sector, the big story was vehicles, not parts. The former’s constant dollar March production is now judged to have been 37.77 percent, not the originally reported 34.76 percent. But then in April, it careened down by 93.60 percent. That is, it nearly stopped.

>For an idea of how profoundly automotive’s tailspin has affected manufacturing’s performance, if it’s removed from the total, factory output’s April monthly contraction would have been 10.29 percent in real terms, not 13.78 percent. That is, still a terrible (and record) performance, but not quite so terrible.

>As for durable goods, its April sequential production drop would have been 12.65 percent in real terms, not 19.27 percent. Again, an awful performance, but much better than the numbers with automotive.

>Speaking of tailspins, Boeing’s troubles have continued to mount because the virus crisis has decimated U.S. travel and transportation, and they showed up in abundance in the April Fed manufacturing report. March’s monthly after-inflation output decrease for aircraft and parts was revised from 10.36 percent to 12.09 percent. And that rate more than doubled in April, hitting 28.88 percent.

I’ll be following up with more detailed April production data later this afternoon!