Cancelling Christmas
Comment of the Day

January 29 2020

Commentary by Eoin Treacy

Cancelling Christmas

  

Eoin Treacy's view

Cancelling Christmas is a closest parallel I can think of for the impact of missing the New Year celebration on Chinese society. Spending on all services, travel, restaurants, hotels and businesses will have been impacted during what is one of their busiest times of the year.

The specific attributes of the coronavirus inhibit control because of the long interval between when the disease in contracted and when people become symptomatic. That suggests it will be both a lengthy and difficult disease to contain while the lethality factor continues to remain a problem. A 2% mortality rate is low when compared to major killers like Ebola but the potential for a wider infection radius is what makes this coronavirus so worrying.

It took SARS approximately six months to hit its peak infection rate but this virus is running over a wider area. That suggests the infection may peak later and the effect on the economy may be greater. The hit to Chinese growth will be material as a result and that falls particularly hard on the commodity sector. That suggests a stimulus program of record proportions is going to be required to reignite animal spirits.

The containment of the majority of cases inside China, at least so far, has allowed the wider market to shake off worries about the potential impact on domestic growth in the USA. Meanwhile Europe depends a lot more on Chinese demand.

Cancelling Christmas is a closest parallel I can think of for the impact of missing the New Year celebration on Chinese society. Spending on all services, travel, restaurants, hotels and businesses will have been impacted during what is one of their busiest times of the year.

The specific attributes of the coronavirus inhibit control because of the long interval between when the disease in contracted and when people become symptomatic. That suggests it will be both a lengthy and difficult disease to contain while the lethality factor continues to remain a problem. A 2% mortality rate is low when compared to major killers like Ebola but the potential for a wider infection radius is what makes this coronavirus so worrying.

It took SARS approximately six months to hit its peak infection rate but this virus is running over a wider area. That suggests the infection may peak later and the effect on the economy may be greater. The hit to Chinese growth will be material as a result and that falls particularly hard on the commodity sector. That suggests a stimulus program of record proportions is going to be required to reignite animal spirits.

The containment of the majority of cases inside China, at least so far, has allowed the wider market to shake off worries about the potential impact on domestic growth in the USA. Meanwhile Europe depends a lot more on Chinese demand.

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