Last week, Apple had some news: There is going to be an iPhone supply shortage.
The outbreak of the novel coronavirus in China has both disrupted manufacturing and depressed demand for iPhones in that country. Apple said its factories are ramping up, but slowly, and Apple stores and many partner stores had to close. “As a result, we do not expect to meet the revenue guidance we provided for the March,” the statement read.
This is doing business in the time of the coronavirus. The spread of Covid-19, as the disease is formally known, is unsettling supply chains, sapping sales of some products, throwing travel into chaos, freaking out the stock markets, and intensifying fears of a global recession.
Apple, in its statement, called the disruption temporary. And that is the hope: that any hurt to companies and manufacturers and economies is a short-lived, passing pain.
But there’s still so much we don’t know about the coronavirus, which makes the potential economic fallout extremely uncertain, for both China and the rest of the world. It is also difficult to completely isolate one factor — in this case, a virus outbreak — from everything else happening in the world that can rattle the markets or strain economies.
So how deep, lasting, or widespread any economic strain will be is hard to predict.
China makes up a much larger share of the world economy than it did in 2003, when SARS, another illness caused by a type of coronavirus, broke out. Today, companies like Apple and Nike and other manufacturers and companies around the world are already admitting they’re feeling the negative effects of the virus.
So too are industries tied to travel and tourism. Airlines, cruise lines, hotels; they all take a hit during outbreaks due to travel bans and warnings, and general fears — real or hyped — about contagion.
And even if the novel coronavirus doesn’t cause a global recession, it could still bring significant long-term changes to the global economy by convincing companies of the need to diversify their supply chains to be less reliant on China.
“It’s a potential threat to the global economy as it goes on longer,” Rohan Williamson, a professor of finance at Georgetown University’s McDonough School of Business, told me. Supply chains can deal with disruptions for a few weeks, relying on supplies they have saved in house. But if it continues past that, he said, “it becomes a little more troubling.”
As of February 27, China has more than 82,000 confirmed cases. The virus has now spread to other parts of Asia, Europe, South America, and the United States. More than 2,000 people have died, most in mainland China, the epicenter of the outbreak.
The fear that coronavirus will continue to spread and impact the global economy looks to be the main reason for the economic jitters.
The coronavirus could prove to be deadlier than it currently is; the fatality rate is around 2 percent, but that could change. It could also prove to be the opposite, if more people are found to have mild cases. The coronavirus could become a pandemic; it could also taper off. Government intervention could dull the effects in populations; a bungled response could do the opposite.
The stock market isn’t the economy, but it’s a signal that investors are worried about the economic outlook for the coming year because of the virus. Basically, they’re predicting that the coronavirus will continue to spread and cause more disruptions, depress demand, and maybe cause a global slowdown. Right now, investors don’t know this is going to happen — no one does — but they’re preparing as if it will. They’re reacting to fears now, but if good news starts breaking, it could swing in the other direction.
Williamson said the stock market volatility is driven by this uncertainty. “As an investor you’re trying to say, here’s this virus. What’s going to be the reaction with the worst case, if things get really bad?” he said. “So your response is going to be prices drop, because you’re going to say, ‘I don’t want want to be the one holding the security if things go really bad [in] a few months. So I will sell it right now.”
Investors are preparing for the worst, and some companies and analysts have changed their forecasts for earnings this year. For example, Goldman Sachs revised its earnings growth estimates to zero for US companies. “US companies will generate no earnings growth in 2020,” Goldman Sachs’ chief US equity strategist, David Kostin, said in a note to clients Thursday. “We have updated our earnings model to incorporate the likelihood that the virus becomes widespread.”
Apple is one of those companies that have revised down their projections for this quarter. Nike, too, is expected to have a grim quarter.
Companies like Nike and Apple also get a bit of a double whammy. “These are two companies that manufacture a significant amount of their products in China, but they also sell a significant amount of products to China,” Randy Frederick, vice president of trading and derivatives at Charles Schwab, told me.
Factories in China were already operating with smaller staffs or delays because of the Lunar New Year. Then came the coronavirus emergency, which saw many factories shuttered. Even as some factories in unaffected areas of the country try to restart production, travel restrictions made it difficult for people to get to work. And because everything is happening so slowly, it is going to take time for these manufacturers to scale back up.
“Even if you came back to the factory, you have to spend 14 days in quarantine. We have some longtime workers that haven’t even returned,” a worker in a Chinese factory told NPR earlier this month.
Then there is the retail side. Government-mandated lockdowns in several cities in China have kept people off the streets — and therefore out of shops, restaurants, hair salons, theaters, and so on.
Many simply closed. Apple closed its stores and corporate headquarters and though has now reopened about half its stores again. Starbucks shut down 2,000 stores in China, about half of its total locations, though it too has started to resume operations.
Pretty much all businesses that rely on China as part of their supply chains or have big retail presences within the country face similar challenges.
Luxury fashion brands in particular, which depend heavily on Chinese buyers, are taking a hit. A report this week from the investment management firm Bernstein found that the coronavirus could end up costing the luxury market as much as $43 billion in sales in 2020, Business Insider reports.
And while big-name brands get the attention, smaller manufacturers might be even less resilient to the shock. For instance, sellers on Amazon, who often rely on cheap Chinese products, are getting pummeled, with dwindling stock to sell. “I don’t think the Amazon platform has seen such a massive amount of inventory problems as we are about to see,” Patrick Maioho, who sells kitchen products on Amazon and advises on manufacturing in China, told the Wall Street Journal this week.
Then there are the airlines, which some experts say could lose as much as $100 billion, and all the other businesses that rely on tourism: hotels, casinos, cruises, tour companies, and more. Chinese tourists are some of the world’s biggest spenders, and travel restrictions, quarantines, and closed borders are making tourism increasingly difficult, to say nothing of visitors to China.
All this means that many industries will likely have a bad start to 2020. But although it may not be a satisfying answer, how bad it will be depends on how long — and how far — the coronavirus continues to spread.
Right now, much of the economic pain is centered in China, and on companies that rely on China for parts or products. But as the virus spreads, and other countries start seeing the number of cases balloon, that pain will be spread around.
“I think we should expect that every country will see cases, and the duration of infection could go on for months — I don’t think we have an end period, necessarily,” Jennifer Nuzzo, an infectious disease expert and senior scholar at the Johns Hopkins Center for Health Security, told me.
Everyone wants to know if the new coronavirus will cause a global recession. The short answer is that it definitely could. Here, again, though, whether it will — and if it does happen, how bad it might be — depends on when the coronavirus emergency is resolved.
A recession is generally defined as two back-to-back quarters of negative economic growth, usually measured by gross domestic product (GDP) — that is, the total value of final goods and services produced within a certain period (in this case, usually a quarter of a year).
Experts I spoke to said that China’s GDP will probably suffer pretty badly this first quarter, and since it makes up about 17 percent of the global economy, that’s not great news. China’s estimated GDP growth for the first quarter of 2020 was about 6 percent. “The vast majority of all economists and others looking at China —and what we know about the virus so far — are expecting, best-case scenario for Q1 in China, zero. Many are expecting negative GDP in Q1, so that right there is going to hurt global GDP to the extent China’s that big,” Frederick said.
What happens in China will have ripple effects outward to the rest of the world. The Eurozone countries are definitely bracing, as its GDP only grew 0.1 percent at the end of last year, so any shock could likely push it toward negative growth.
The US does have one of the world’s strongest economies right now, so it’s a bit more protected. The US’s GDP grew 2.1 percent in the fourth quarter of last year, and experts say it might do a bit worse at the start of 2020 than it did last quarter, but is unlikely to see negative growth, at least for now.
Of course, the big question is how long does this coronavirus outbreak go on? If the coronavirus isn’t contained and these trends continue, the likelihood of a global recession increases. It’s also important to remember that the coronavirus is just one factor, which might exacerbate other strains on the global economy, like trade wars.
“As it gets more and more severe and infects more and more people, the impacts become greater and greater, and the countries that are teetering on recession already anyway will be right there,” Williamson said.
Experts I spoke to cautioned that if governments respond appropriately and this outbreak is blunted, the worst-case scenario will probably be avoided. That doesn’t mean it will be averted equally around the world, or even in all industries or labor forces, of course. But when it comes to the global economy, the theme for now is “don’t panic.”
And if the world gets the best-case scenario, and this outbreak is resolved within the coming weeks, a bounce-back might mitigate some of worst effects from the start of this year.
This is good news for companies like Apple that make durable goods, but could be bad news for services like restaurants or casinos or hotels, which will have a harder time making up the lost revenue, Frederick, the VP of trading and derivatives at Charles Schwab, told me.
He explained that if you wanted to, say, buy an iPhone or a washing machine or a car but weren’t able to because of a supply shortage, or a store closing, you might be okay waiting to buy that product later once it’s available again — provided that the economic shock is temporary enough that you still have a job and money to spend.
But if you normally go to a coffee shop every day or if you hit the casino every weekend, and now you can’t because of the coronavirus, once things get back to normal, you’re not all of a sudden going to make multiple trips or visits to make up for that.
The coronavirus outbreak has definitely exposed vulnerabilities for companies, especially those that rely heavily on China for their supply chains and products. This may force companies to cut some of their dependence on China, something that already started to happen because of President Trump’s trade war.
That almost certainly doesn’t mean abandoning China altogether, but rather distributing or diversifying supply chains to better protect against major crises that dramatically impact one country or one region more than others.
That also does not necessarily mean more manufacturing will come back to the United States, as Commerce Secretary Wilbur Ross recently claimed, but it means companies will likely be looking elsewhere.
And even for companies that aren’t really dependent on China, it’s still a good reminder that no one knows when or where the next pandemic or crisis might happen. But one thing is certain: There will be another one at some point. Which means preparing for that now is a good idea.
Good morning, Greater Sudbury! Here are a few stories to start your day – Sudbury.com
Good morning, Greater Sudbury! Here are a few stories to start your day on this Saturday morning.
Rising case counts see Public Health Sudbury reinstate work-from-home rule as of Monday
Saying local COVID-19 case rates remain “unacceptably high,” Public Health Sudbury & Districts is reinstating work-from-home requirements as of Monday. Continued high COVID-19 case rates mean that the Public Health Sudbury & Districts area is among the top three most affected jurisdictions in Ontario, said a press release issued Friday. Local protective measures, including a reinstatement of capacity limits first issued on Nov. 8, have suppressed rapid growth in cases; however, case rates remain unacceptably high, threatening health and the health system, in-person learning, and local transition to a “reopened” community, said the health unit. PHSD said it is announcing “a measured and responsible approach to the current situation.” The medical officer of health is reinstating work-from-home requirements, revoked by the province on July 15, issuing strong recommendations for COVID-19 protections to area schools, businesses, and organizations, and enacting stricter measures for the follow up of contacts of cases of COVID-19. “We have carefully reviewed recent data and consulted with the province’s chief medical officer of health,” said Dr. Penny Sutcliffe, Medical Officer of Health with Public Health Sudbury & Districts. “Although school-based cases and household spread are currently driving our continued high case counts, cases continue to be reported among young adults, social settings, and workplaces. It is hard to find a setting that is not impacted. “With the widespread circulation of the virus in our community, our response also needs to be widespread, reducing mobility and face-to-face interactions overall. This is the purpose of the work-from-home Instructions. Further, every sector needs to do their part, voluntarily at this time, to pave the path to lower case rates and re-opening.” You can read the full Letter of Instruction here.
Variant prompts ban on travellers from southern Africa
Canada has banned visitors from southern Africa after the discovery of a new variant of concern in the region. The new variant, deemed Omicron, first emerged in South Africa and coincided with a steep rise in the number of COVID-19 cases in that region in recent weeks, according to the World Health Organization. The ban will apply to foreign nationals who transited through a list of seven countries in the last 14 days, including South Africa, Mozambique, Botswana, Zimbabwe, Lesotho, Namibia and eSwatini. Global Affairs is also issuing an advisory to discourage non-essential travel to South Africa and neighbouring countries. “We know very little about this variant right now,” Canada’s chief public health officer, Dr. Theresa Tam, said at a briefing Friday. The mutations that have been detected show the potential for greater transmissibility, she said, and she won’t be surprised to see cases crop up in Canada. “This variant has a large number of mutations, some of which are concerning,” the WHO wrote in a statement Friday. “Preliminary evidence suggests an increased risk of reinfection with this variant, as compared to other (variants of concern.)”
Sudbury leads Ontario in opioid death rates, but Ford’s more interested in a GTA road, Bigger says
When it comes to Greater Sudbury’s homelessness and opioid crises, neither Premier Doug Ford nor Health Minister Christine Elliott are picking up the phone. This, Mayor Brian Bigger said, has him feeling “ghosted.” “He refuses to talk and his ministers refuse to respond or provide funding that we need in our community,” he said. “This is really a sad state when there is no response.” Earlier this week, Bigger penned an open letter to the premier in which he requests the province’s support and affirms that he’s available to discuss matters at any time. “This is about the City of Greater Sudbury having the highest per-capita (opioid) death rate in the province … and not even getting the courtesy of a callback from the minister of health,” he told Sudbury.com. It’s not as though there isn’t any money available, Bigger said, noting that the province managed to find $6 billion to spend on Highway 413 in the Greater Toronto Area. “That’s just not acceptable,” he said, adding that the city has been pushing for the province’s help for the past two years.
Sudbury names new economic development lead
Sudbury has a new economic development lead. Meredith Armstrong, who has had a long tenure with the city, moved into the role of director of economic development, effective Nov. 19. She replaces Brett Williamson, who has left the position for a new opportunity outside the organization. “With her unique achievements and her well-established relationship with the Greater Sudbury Development Corporation (GSDC) board, Ms. Armstrong embodies all the qualities needed to continue to support the work of the GSDC board in her new role as director,” said Lisa Demmer, GSDC board chair, in a Nov. 25 news release. “I want to thank Mr. Williamson for his efforts and dedication as we worked together to position Greater Sudbury for ongoing economic recovery and success amidst the COVID-19 pandemic. I wish him all the best in the future.”
Salvation Army Christmas Kettles now in place around Sudbury
Salvation Army volunteers are back beside their kettles, and this year offering a chance to “tap” your donation to keep everyone safe. The kettles are in place across Sudbury and will be until December 10, and this year feature $5, $10, and $20 “taps” so that you can use your debit card, credit card or Google/Apple pay features to donate to the Salvation Army. The kettles will also be in place for cash donations at locations across Sudbury. Donations go to the Salvation Army food bank, and to fill out their annual Christmas Hampers. This year, they have 600 families signed up to receive a hamper filled with the makings of a Christmas dinner, including a turkey, as well as toys for any children. Their fundraising goal this year is $220,000 to cover the community’s needs. All of the money will stay in and be used to help people in Sudbury. They are still in desperate need of volunteers, however. Lyn Mullen of the Salvation Army told Sudbury.com that each year, there are 1,000 volunteer shifts to fill. “That’s a two hour shift, five times a day, at six locations until December,” said Mullen. “All the money stays in Sudbury and is used for all our family services, which includes our food bank and our Christmas hampers.” If you would like to volunteer and are double vaccinated, you can contact the Salvation Army at their email address, firstname.lastname@example.org, or at 705-673-5893 ext. 203.
Ontario still in fourth virus wave, likely to continue through winter, top doc says
Ontario’s rising COVID-19 infection curve is a continuation of the fourth wave that started earlier in September, and not the start of a fifth wave, the province’s top doctor said Thursday as he warned that the upward trend would continue. Chief medical officer of health Dr. Kieran Moore said case counts never got back to a low level despite a slight dip before steadily increasing again in late October. “We never declared the fourth wave over, this is simply a continuance,” Moore told reporters. “Sadly, all modelling would predict this would slowly, steadily rise and increase over the coming months, including January and February.” He said higher case counts were anticipated as people moved indoors in the cold weather, and asked people to remain cautious until the weather warms up in the spring and more people become eligible for third vaccine doses to protect against the “formidable foe” of COVID-19. “It just continues to want to spread and it won’t slow down again until we get outdoors in the springtime,” he said. “We do have a time period over the next four months that we’ll have to continue to be very, very vigilant.”
Winter weather will stick around this weekend
Expect a sunny day for your Saturday with winds of 15 km/h and a high of -9. That wind will mean a wind chill of -20 this morning and -12 this afternoon. The UV index today is one, or low. Tonight, expect increasing cloudiness and a low of -11. For Sunday, expect cloudy skies and slightly warmer temperatures. The afternoon temperature is expected to hit -6, with a 60-per-cent chance of flurries. Sunday night, the clouds will stick around and there is a 30-per-cent chance of flurries and a low of -10.
COVID-19 vaccine for kids: CHEO clinic kicks off this weekend – CTV News Ottawa
The push to quickly get jabs into young arms continues as kids in the capital rolled up their sleeves for their first COVID-19 vaccine.
Ottawa Public Health says about 1,200 doses were administered to children aged five to 11 on Friday, the first day of the city’s paediatric vaccination campaign.
This weekend is the start of CHEO’s vaccination clinic through the Kids Come First health team. That’s where Tracy Schulz’s son, Aiden, is getting his shot.
“They phone me Thursday and the appointment’s Sunday,” said Schulz. “It’s happening pretty quickly and I’m pretty excited about that.”
Aiden is a little less excited.
“I just don’t like the feeling of something going into my body,” said the nine-year-old, who is afraid of needles.”
CHEO says its clinic is aimed at easing some of those anxieties.
“The way our clinic is different is we offer more time and space per vaccination appointment and we have resources and support that focus on providing the child with the best experience, a really positive experience,” said Stephanie Carter, the director of ambulatory care at CHEO.
Carter says paediatric experts and people from the autism team will be on hand—including CHEO’s therapeutic clown, Molly.
The CHEO website states the clinic is geared toward children who are immunocompromised, individuals with autism or anxiety, and those who have a condition that makes its challenged to be vaccinated in the community.
Running Saturday and Sunday, the clinic has capacity for 300 kids a day.
Appointments can be booked by preregistering on CHEO’s website.
“We’re hoping that the smaller environment’s a little bit more intimate,” said Schulz. “They’re used to dealing with kids and that will make a difference.”
No new Covid-19 cases reported in Northwest Territories – Cabin Radio
The NWT on Friday reported no new cases of Covid-19, only the third day of reporting to come back blank since the territory’s latest Delta-variant outbreak began in mid-August.
The active case count across the territory dropped from 42 to 35. Twenty-eight are in Tuktoyaktuk – which now has a rabies warning to contend with – while four are in Yellowknife and one each in Inuvik, Norman Wells, and Hay River.
There was no change to the number of hospitalizations, intensive care admissions, or deaths.
Meanwhile, the World Health Organization on Friday dubbed the globe’s latest variant of concern Omicron.
Omicron, identified in South Africa, has a large number of mutations. Early evidence suggests it could be significantly more transmissible than Delta and present an increased reinfection risk.
However, the amount of evidence related to Omicron is low. The variant was only identified last week and the number of cases studied to date numbers in the low dozens.
Some countries, including Canada, moved swiftly on Friday to impose travel restrictions on South Africa and neighbouring nations.
Canada currently has no direct flights to or from the affected region, but nevertheless banned the entry of all foreign nationals who have travelled through South Africa, Mozambique, Namibia, Zimbabwe, Botswana, Lesotho, or Eswatini in the past 14 days.
Some observers criticized the rush to travel bans, arguing South Africa was in effect being punished for operating a particularly effective variant surveillance program.
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