Markit reports Output Contracts at Fastest Pace in Survey History amid COVID19 pandemic
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Key Findings
- Flash U.S. Composite Output Index at 27.4 (40.9 in March). New series low.
- Flash U.S. Services Business Activity Index at 27.0 (39.8 in March). New series low.
- Flash U.S. Manufacturing PMI at 36.9 (48.5 in March). 133-month low.
- Flash U.S. Manufacturing Output Index at 29.4 (46.5 in March). New series low.
Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 27.4 in April, down from 40.9 in March, to signal the fastest reduction in private sector output since the series began in late-2009.
Services companies registered the steepest rate of decline in the survey’s history, while manufacturers recorded the sharpest fall in sales since the depths of the financial crisis in early-2009.
The cancellation and postponement of orders led firms to reduce their workforce numbers at a rate far exceeding anything seen previously over the survey history at the start of the second quarter.
Chris Williamson, Chief Business Economist Comments
- “The COVID-19 outbreak dealt a blow to the US economy of a ferocity not previously seen in recent history during April. The deterioration in the flash PMI numbers indicates a rate of contraction exceeding that seen even at the height of the global financial crisis, with jobs also being slashed at a rate far exceeding anything previously recorded by the survey.”
- “The large swathe of non-essential business that has been shut down temporarily amid efforts to contain the virus means the blow has been most heavily felt in the service sector, and especially for consumer facing companies in the recreation and travel industries. Those companies still actively trading meanwhile reported the steepest drop in demand seen since data were first available, and are also struggling against twin headwinds of staff shortages and supply chain delays.”
- “The scale of the fall in the PMI adds to signs that the second quarter will see an historically dramatic contraction of the economy, and will add to worries about the ultimate cost of the fight against the pandemic.”
Still Actively Trading
Comment #2 is interesting: “Those companies still actively trading…” implies Markit was unable to reach some companies.
What’s Next?
On March 23, I wrote Nothing is Working Now: What’s Next for America?
I noted 20 “What’s Next?” things.
Covid-19 Recession Will Be Deeper Than the Great Financial Crisis
On April 1, I commented, the Covid-19 Recession Will Be Deeper Than the Great Financial Crisis. Do not expect a V-shaped recovery.
Forever Changed
- More teleconferencing and fewer corporate lunches
- Less air travel, hotels, and car rentals at the personal and business level
- More work at home
- More do-it-yourself haircuts, nails, lawns, etc.
- Fewer car purchases
- Fewer home purchases
- Accelerated online shopping and more mall closures
The knock on impacts of all of those means more bankruptcies and less employment..
The Markit report and comments from Chris Williamson lends support for my views.
Note: In case you missed the announcement, I am now on TheStreet.com/Mishtalk
The redirect is automatic and there will be no lost articles or lost comments to articles. My “room” on TheStreet will remain free of charge.
Mish
It appears as if we are now fully involved in a negative feedback loop. Debt default will cause deflation, which will lower asset values, wiping out equity, causing more default. Repeat, repeat, repeat.
The interesting thing is how people at the lower income levels who are now reaping a windfall from unemployment and Cares are also becoming delinquent on debt, and in some cases now refusing to pay rent. Not paying your bills appears to be the new fad.
Issuers of credit are going to have to decide between leaving borrowing standards loose and accepting the default losses or tightening credit and the negative effects on the economy that will cause.
We have not yet even begun to see the impacts from commercial property default or the default of cities, counties, and States.
So far as the stock market, it has definitely now become a lagging economic indicator and not a leading one…
And just to make absolutely certain crisis is total and permanent for the future there is this: Coronavirus is a Rorschach test on how best to battle climate change
I found three unique stories at different web pages today that basically say we have to apply the same level of change (or more) to the climate “crisis” as we have to the pandemic, or we will face death and collapse from climate problems.
So, who looks forward to spending the rest of your life in permanent crisis? With all the shaming that goes with not conforming perfectly every moment of the rest of your life? With never being able to get it right, or to fail to go above and beyond in the eyes of others, not to mention the total loss of freedoms.
And the sad part is that with marketing during a major pandemic they will very likely win. Even if people reject the silly far left eco Nazi agenda with time the campaign will wear people down. And even though the climate Gestapo thinks it is doing mankind a favor there is a total and complete diametrically mutually exclusive relationship between commerce and climate. All commerce will be labeled as harmful. And the forces of darkness will only admit that their agenda requires the lowering of the population of the planet to under a billion people after they are at least halfway there. And worse, the goalposts will always be lowered, by the time the human population reaches less than 2 billion they will be touting a population that is as low as is required to prevent extinction of the species.
If they were honest, with themselves and us then perhaps it would be easier to go along with them, but since everything about the “climate crisis” is a lie we cannot expect them to behave in a manner a rational person can agree with.
Hooray I have a comment box now,
So far the new site seems to work fine Mish.
Yep, feels snappier as well, but that could be because the server was recently rebooted.
Even with Trump’s limitless generosity this perfect storm will crush everything.
It is wonderful!
UBI is HERE NOW. Yang was right. Trump will help everyone if we let him.
I’ll net that drives the far lefties absolutely nuts.
I feel there are lots of things that will never recover in this environment of social distancing.
Resteraunts, airlines, movie theaters, assembly lines, hair salons, massage therapy, meat processing, sonographers.
I had my hair cut today in the house by my normal stylist against the law. I believe this to be a plandemic and I was nervous and had her wear gloves and a mask. So I do not see a quick return to normal.
As a side note I have read that Jumbo loans are essentially frozen, good times!!
I take the other position, and not out of disagreement, things have changed and people will be nervous for a while, but in the long-term I believe that we will forget about this in time, humans are social animals with convenient memories, it is incompatible with our basic nature to “social distance” and even now it is causing unbelievable stress, personally and economically.
In fact some people are fighting back, protesting against it while others resigned themselves to get sick and possibly die because they cannot adapt to it in the first place. And do not even get me started on the fact that a six foot space around you is just NOT going to protect you, it only lowers the infection rates by a small enough margin that when spread out over billions of people will effect the infection rate just enough to flatten the curve. In fact, social distancing is not a good thing at all after that curve has been flattened because it complicates herd immunity. And masks are actually worse than useless, the give a sense of false confidence that leads to risk taking intentional or not even as they do not stop viral particles from being spread. Then again, as we learn more about the virus we will see other ways to stop it’s spread.
Eventually there will be both a vaccine and better treatments, therapies that are not quite cures but that lower the death rate to nil. The day may come when there is a real pandemic that has a mortality rate in the 80-95% with no immunity that will take us by surprise, that might scar the survivors enough to ingrain fear of proximity to others, but this will just be a blip that will go away within weeks of the crisis being over, we just can’t see that yet because we are still in crisis mode inside that blip.
“The COVID-19 outbreak dealt a blow to the US economy of a ferocity not previously seen in recent history”
More like the pinprick that popped the biggest bubble in history. It was coming no matter what.
Bubble Economy = Franz Ferdinand
CoVID19 = Gavrilo Princip
“History doesn’t repeat, but it rhymes.” — possibly Mark Twain
Largest study to date: Infectious diseases that can be acquired from other humans foster conformity and authoritarian attitudes. link to twitter.com
What’s the evolutionary explanation for the urge to gather on the courthouse steps with other obese toddler-men carrying rifles because a Russian bot posted something on Facebook?
Breaking news: People like freedom. Want to preserve if they sense it is threatened.
Waddling around on the courthouse steps with 40lbs of guns and misspelled cardboard sign… for freedom!
WOLVERINES!
Freedom to remain stupid is the most important of them all?
Well in Spain and possibly EU they are looking at permanent tracking of everyone
The article says the only limit is “the amount of privacy the government wants to keep” , not allow but keep – because they consider it their domain also. For the word freedom in the US, in Europe “privacy” is maybe its substitute . The authorities say that “persuasion will always be primed before obligation” , read that as you will.
In Europe, they don’t protest by waving guns around because they would be shot. They protest by crowds and demonstrations… oh, no more of those either, if movement is registered at all times. Don’t follow the rules ? You get fined, and if often they just drag you away. No possibility of contest. That is reality of power structure here, you don’t want that in the US, because it subtly permeates every facet of people’s lives with a feeling of oppression.
“Think of how dumb the average person is, and realize half of them are dumber than that.”
— George Carlin
I love George, but he meant “median.” If we’re talking “average” I’d estimate at least 75% are stupider than average.
It SOUNDS better as Carlin related it. The world isn’t a meeting of mathematicians!
The study is interesting but incomplete. In theory being more hierarchical/authoritarian means that the south should have less infection.
The question is if there are other realities which explain the circumstance. I don’t doubt that a reaction in times of stress is to close circle as well. What the study actually shows to me is the historic racial divide in the south, which originated likely not due to fears of infection, that merged into a continued trend of authority and where prevalence of infections is denoted above all amongst the black population. So that maybe amplifies the whole scenario into the bargain, being something of a feedback loop.
You notice the study is much based on STDs , and I am in no position to purposefully discriminate by colour based on prevalence of STD. If you know that a group of people whether black or white or who drive nice cars etc. is more infectious though, you will avoid. The bigger question is obviously if authoritarian society led to a reality that discriminated say racially, which left that portion of society more vulnerable to infection, say via poverty. Or not.
Not an argument that is mine to hold, but I expect a little of each reality will be at work.
As has been quoted, ad nauseam, but still worth repeating, ‘never let a good crisis go to waste.’ There will be no back-tracking.
It’s probably and annoyingly the most overused rag these days.
Slightly off topic but i think its potentially really good news. If the Cuomo announced research that herd immunity is at double digits already is true that’s very promising news. Also would mean cfr is substantially lower than previously assumed.
However its obvious this is worse than your normal flu, but i’m starting to think it’s the ease of transmission which makes this coronavirus create more sickness and death since more people get it, more easily. But it also means that there may be a solution where restrictions are relaxed but with rules focusing on minimising infection as much as possible.
APRIL 23, 2020
Special Report: As virus advances, doctors rethink rush to ventilate
As dad once said “Dont be so negative!” Americans invented “Pent-up Demand,” and if there is credit still available on their cards, everything will be back to normal no matter how many dead bodies we have to surf over …
I’m really hoping for a v-ish-shaped rebound…
Can’t tell if u are being sarcastic or not.
Netflix’s junk bond offering 10x oversubscribed.
Mish is wrong again. No one’s expecting deflation.
Wait. Listened to Bill Flenstein with Jesse Felder.
1979 -1981 Gold rise because no one believed Volker would be succesful. He was, they were wrong. Can happen again, in reverse.
When the virus hits heavily populated Indian and African areas what chance there will be a low probability mutation that makes it more deadly?
Returning to hit the young and otherwise healthy?
This would be a nightmare scenario, a recurrent Grim Reaper.
If it doesn’t happen this time, it will sooner or later. If our current response is any indication of our future response, we’re toast.
Show me an example of a virus from HIV to SARS1, west Nile, mers, etc that mutated to be more deadly after exposure to the general population. That’s not usually the way it works.
Next week the other FAANG stocks report. Google, Facebook, and Apple are going to disappoint the street. Next week is when I expect reality to come back to the markets as these companies are not completely exempt from macroeconomic forces. With 20% of S&P500 market cap among them it won’t take much to move the entire market significantly lower.
I will also add that I think Amazon beats but that makes me less bullish on them as well. Amazon will become increasingly at risk of Anti-trust issues going forward as they build vertical supply chains.
For the bears, it’s always “next week”. This started 2009. Quit it already.
Those guys will BEAT, because of the earnings expectation game. Mish documented it multiple times already
The Powell Put … market only moves in one direction from here on out.
Own reply box and easy login, page seems smoother also.
In EU they are looking at -30% GDP yearly at this rate
The covid crisis will end at some point. Longer term though, just as damaging may be a significant breakdown in relations between China and the rest of the world. US China relations were already had prior to this, anyone care to comment how this might play out longer term?
China’s structural economic issues, detailed by Mish and others, will become impossible to hide or ignore internally.
This will lead to unprecedented social unrest, which will lead to leadership’s need for scapegoats, which will lead to war.
Exactly when and with whom, now that’s the trick.
Rubbish. If anything, it’s the US that will initiate a war. The Chinese and Russian will combine to finish us.
Democrats: Anti Russian
Republicans: Anti Chinese
Our political class agrees that foreigners are the problem.
How and why would the Chinese and Russians combine to finish us? They aren’t exactly friends. Russia, as a petrostate, has its own problems now and an economy along the lines of Canada when it’s actually working. Even if China can and does shun the US, the rest of the world isn’t exactly happy with them right now. Hopefully all three countries just go about their business digging out of this mess.
The enemy of my enemy is my friend. Americans really have short memories. The opposite is true on the other side of the world. The cold war etc has pretty much fomented a dislike of America in Russia. Also if America “defeats” China, Russia will be pretty much surrounded by America’s “allies”.
America is not going to defeat China, heck Vietnam and Iraq were a problem. I doubt Russia worries about that. America needs to step back and let China and Russia rekindle all their old animosities and just not get involved. Not getting involved should be the order of the day for America. Getting involved is the only place where we will go wrong.
Hot war between major powers is soooooo 20th Century. Not a chance.
House of Cards (economy)
Anyone knows a decent HoC takes a while to build … and only a moment of disturbance to …
In stages, I expect a few nasty things:
Insert any helicopter money programs, international conflict and riots in between.
The pandemic is catalyst, but the reckless financial house of cards was going to collapse eventually.
We’ll be lucky if that’s all that goes wrong. I see riots and social chaos in some areas, especially large urban/metropolitan places.
The bubble in people has popped.
#1 I expect, as in the second wave of coronavirus this fall. #4 I most hopefully hope is not correct (though it probably is) as I live off of my pension!!
Dow 1 million then. Man it’s getting more and more bullish!!!
So that explains why the stock market is up again today!
Algos have yet to be reprogrammed. Current algorithm is:
If (news bad) then
free money spigot
end if
While everybody assumes, they’re some complicated math.
It’s yet to be shown if the algos need reprogramming (RE: free money spigot)..
Easy answer for that one. Computerized trading. Stock market has no relation to the overall economy anymore.
It’s just a Fed Money Printing computer game now.
An on-line casino.
All evidence points to the dreaded and feared D word. Look’s like a global depression is here or almost here. Facts don’t lie.
And when the second phase of virus surge happens the entire country may face severe food distribution disruptions. That’s when you’ll see me selling pitchforks and torches on the corner.
It appears you have to sign on again
Mish, what about supply chain parts so they can return to work?
or is china still not producing for merica companies
and mexico is also shut down
JIT – still biting until they wake up and bring it back to merica
On The Street
Glad to be here!
That did not have a good ring by today’s standards.