By Robertson, Charles, CRobertson@rencap.com
TUE, MARCH 03 2020-theG&BJournal- The headlines today in the US may be dominated by Super Tuesday – but it is the coronavirus spread which will be getting headlines soon.
We started banging the drum (on twitter) about Iran greatly understating its number of cases on 24 Feb – a day after its deaths reached 5. Italy reached 6 deaths on 25 Feb. Cases in both countries have now risen above 1,000.
The US yesterday admitted to six deaths but just 105 cases. That number of cases is at least half the real number (if Italy is a reliable guide), or just 10% of the real number if you trust Chinese figures more – for example Guangdong (near Hong Kong) had 1,342 confirmed cases on the same day it reported six deaths.
A big part of the problem with US data would appear to be the testing kits – and this article suggests only 459 tests were conducted as of 28 Feb.
Where does it go from here? Countries that have quickly taken the virus very seriously like Singapore (still no deaths reported), or Japan, have so far contained the virus well. Countries where the number of cases looked oddly low – such as Iran and perhaps Italy even – have seen the virus cases rise dramatically.
Having spent last week in the US, I’d see Italy as a better template than Japan. Note that Italy has tested many people, including those with no symptoms. So the data we get out of the US will still depend on what data they release and how many people they test.
PS – I’m not the only one saying this – just had a reply on twitter from the Fred Hutchinson Cancer Research Centre which suggests 330 infections as of 2 March with a 90% interval of 20 to 1,500 infections – mainly around Washington state.
Meanwhile, on Sunday night we said that Germany, France and maybe Spain would see the biggest percentage rises and the data do show numbers picking up there and quickly. (Note the US figure below should not be treated as credible).
In terms of supply shocks – the picture below gives some hint about why the high number of cases in China, South Korea and Italy matter, and why the spread to Germany and France is a big deal too. 7 countries representing 65% of global manufacturing output now have 100 cases or more and none except China now (and Japan always) appear to have the virus under control.
The good news is that China might be able to consider going back to work in a big way. Aside from Hubei (114 new cases), the only new cases were Zhejiang (7 extra cases .. it had 8 days from 22 Feb with no new cases), Hong Kong with 2 extra, Shanghai with one and Liaoning with 3.
So China with 28% of global manufacturing can (mostly) go back to work. Germany, France, Italy and South Korea – with 13% of global manufacturing has to work out how to keep the economy going while trying to minimise the virus spread now .. and then the US with 16.6% may have to work out what will need to do. If the US today is like Italy on 25 Feb in terms of deaths, it could be showing 2,000 confirmed cases by 11 March, unless Chinese style measures are enacted. All these other countries are going to make March a messy month.
The big question we will find out the answer to this month is whether Europe and the US are willing to do China style restrictions and if not, whether they can contain the virus.
The hope is that by May (also when hospital beds are freer as normal seasonal flu fades) – the economy will bounce back.
Meanwhile, as more and more data come in, we can get a better idea of the case fatality rate (CFR). This was always odd looking in Hubei, and Iran, but also gets distorted now that Italy and Korea are recording deaths but not many recoveries (recoveries take longer). Our ex Iran/Hubei CFR of 1.4% a few days ago is now 1.8% due to Italy and South Korea.
A decent proxy may come from China ex-Hubei – because China is much further along the time line of the outbreak, so has many more recoveries to show. Ex-Hubei there are 109 deaths vs 10,617 recoveries, gives a 1.0% case fatality rate (109/(109 + 10,617)) – has been steady for a few days now. Arguably that figure could be a bit lower in more developed markets like Singapore (with 108 cases, they have no fatalities).
Another guy is using the Diamond Princess ship as a proxy, where the average age on the ship was apparently 46, and 3,000 out of 3,700 were tested, and with six deaths he estimates the CFR is 0.8% (of 705 confirmed cases – this is actually the wrong way to count this but, he redeems himself by looking at critical cases and says, if half of the 36 still in a critical condition die, you get 3.3%. If none do, the CFR is 0.16%.
CONCLUSION: Although I’m getting more confident that the case fatality rate will be 1.0% or less (ex Hubei), there is still another few weeks of consumer anxiety/panic to come as Germany, France, the US and presumably the UK see a big rise in cases. This could make March a European supply shock to global supply chains on top of China’s February shock. The supply chain shock might be priced in by last week’s fall, but perhaps not the retail anxiety/panic to come. A global economic recovery looks like an April event at the very earliest, but more likely May or June.
Charlie Robertson, Global Chief Economist Renaissance Capital
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