SYDNEY — Australians are beginning to tighten their purse strings because of the country’s deadly bushfires, according to a survey released on Wednesday, a sign that the economic impact of the crisis is likely to deepen.
As authorities warned that a days-long respite from high fire danger was coming to an end, economists said the cost to Australia’s A$1.95 trillion ($1.33 trillion) economy could be as high as A$5 billion ($3.4 billion).
That would shave around 0.25 points off gross domestic product in the December and March quarters, a development that some economists said could prompt the country’s central bank to cut rates as early as February and lower its growth projections.
Consumer sentiment in January was a hefty 6.2% lower than a year earlier, according to the Melbourne Institute and Westpac Bank survey released on Wednesday. Consumer sentiment data is considered a leading indicator, running ahead of actual spending data.
“The risk is that as economic loss from the bushfires materializes, consumers could still become more cautious in February,” said Citi economist Josh Williamson.
The huge bushfires have cut through the country’s east coast during the peak summer months when many businesses usually rake in earnings from both domestic and foreign tourists. Agricultural sectors, particularly the dairy industry, have also been hard hit.
The deepening financial woes intensify pressure on Prime Minister Scott Morrison, who has faced criticism over his handling of the crisis and his conservative government’s stance on climate change.
Australia is one of the world’s largest carbon emitters per capita due to its reliance on coal-fired power plants, and the bushfires have become a global talking point with regard to climate change politics. Morrison has repeatedly rejected calls for Australia to increase its carbon emission reduction targets, insisting such a step would it would do too much damage to the country’s economy.
Late on Tuesday, Morrison reiterated his view that preemptive burning of bushland to remove flammable vegetation was as important as reducing emissions to prevent bushfires, a position that has been rejected by fire services chiefs.
Temperatures in New South Wales and Victoria states began to rise on Wednesday after several days of cool weather, leading authorities to renew “extreme fire danger” warnings in some areas where existing fires could be intensified or new blazes sparked into life.
Here are today’s key events in the bushfire crisis: * The wildfires have killed 29 people, destroyed more than 2,500 homes and razed 11 million hectares (27 million acres) of wilderness – an area one-third the size of Germany – since September.
* Scores of fires were burning in New South Wales and Victoria states on Wednesday. Temperatures in Victoria were expected to top 32 degrees Celsius (89.6 Fahrenheit) on Wednesday, leading officials to declare “extreme fire danger” in some areas. Temperatures in NSW were forecast to hit 40 degrees C (104 F) on Thursday.
* A Reuters analysis shows that Australian animals living in specific habitats, such as mountain lizards, leaf-tailed geckos and pear-shaped frogs, are battling the threat of extinction after fierce bushfires razed large areas of their homes.
* The air in Sydney is expected to again reach hazardous pollution levels on Thursday as smoke drifts over the city, the NSW state government said. Sydney, Melbourne and Canberra have all been periodically blanketed in smoke over the past several weeks, giving all three some of the worst air quality ratings in the world.
* Players at the Australian Open tennis tournament continued to make pledges of financial assistance. Among the latest were the seventh seed, German Alexander Zverev, who said he would donate A$10,000 for each match he wins and pledged his entire prize money of A$4.12 million if he wins the tournament. American John Isner has pledged 25% of all his prize money and A$100 for every ace he serves.
($1 = 1.4620 Australian dollars) (Reporting by Colin Packham and Swati Pandey in Sydney; editing by Jane Wardell)
China's recent air pollution levels may be telling a story about the coronavirus impact on its economy – CNBC
Office buildings amid the heavy haze at Beijing’s business district, in a photo from 2017.
Zhang Peng | Contributor
All eyes are on China’s progress in getting its factories to crank up again, after the country extended this year’s Lunar New Year holiday and shut down major growth regions in a bid to contain the coronavirus outbreak.
Many of its provinces started gradually limping back to some form of production last week, about two weeks later than previous years.
The Chinese government has also been giving regular updates, reporting last Wednesday that work resumption rate has topped 50% for some industrial companies in key economic regions such as Guangdong and Shanghai.
Chinese state media also reported Tuesday that more than 80% of its central state-owned companies’ roughly 20,000 manufacturing subsidiaries have resumed work.
But here’s how some economists and analysts are tracking the story of China’s progress in returning to work — as the world’s second largest economy gears up to return to full production.
Air pollution levels, coal consumption
Analysts are using pollution levels as a gauge of industrial activity. Major cities in China are well known for being choked by smog, due to the extensive burning of coal by factories.
So far this year, pollution levels have been between 20% and 25% lower compared to the same period last year, Tapas Strickland of National Australia Bank (NAB) said in a note earlier last week, suggesting there was a substantial decline in industrial activity in the first quarter.
Referring to the official update that more than 80% of China’s 20,000 manufacturing subsidies have resumed work, Rodrigo Catril, senior foreign exchange strategist at NAB, cast doubt on the actual progress.
“This news should have been embraced warmly by the market, however high frequency data such as pollution levels and traffic congestion gauges in Beijing do not at this stage corroborate the upbeat official message, keeping investors wary,” he said in a note Wednesday.
On Feb. 20 (Thursday), daily coal consumption of six major power plants was 42.5% less than the same time last year, according to Nomura, which has been tracking such metrics daily. The Japanese bank has also been following data on traffic congestion, passenger flows and new home sales in a bid to track the progress of China’s work resumption.
“The pace was slow due to a lack of workers and strict reopening criteria, and it varied across cities, industries, and firms,” J.P. Morgan’s Sin Beng Ong wrote in a note last week.
“The weak resumption of production is reinforced by a set of high-frequency indicators in the areas of energy consumption, real estate transactions, passenger traffic, and air quality,” he said.
Passenger migration across China
Other metrics — such as traffic congestion and passenger numbers — could also shed some clues on the full picture of China’s return to work.
Analysts typically look at the Baidu Migration Index, which tracks the number of workers returning from their hometowns to work after the Lunar New Year (LNY) holiday.
“The Baidu migration index suggests that only 37% and 33% of people that left tier-1 and key tier-2 cities for LNY have returned (vs. 100% at this point last year),” Morgan Stanley analysts wrote last week. large
According to Nomura, the worker return rate for 15 cities was 25.6% as of Feb. 19, only around a quarter of what was recorded a year ago.
However, Oxford Economics pointed out in a note on Thursday that such gauges do not completely reflect the full back-to-work progress, as they don’t take into account the practice of working from home amid the virus crisis.
“Pollution and traffic volume statistics provide one guide to the speed at which China is returning to business as usual,” the advisory firm said.
“But they’re imprecise indicators of activity growth and will fail to fully capture shifts in spending and activity (e.g., greater online spending and remote working),” it said, adding that the first gauge will “come from the business surveys of sentiment.”
The ugly side to the booming U.S. economy, in one telling chart – MarketWatch
Low unemployment rates, rising wage growth, a relentless bull market — by many measures, the good times are rolling. Just ask President Trump, who is glad to take credit for “the greatest economy in our nation’s history.”
But there is an ugly side to this boom that you obviously won’t hear Trump talk about at one of his MAGA rallies, according to the Wolf Street blog’s Wolf Richter, who calls it the “bifurcation” of the U.S. economy.
“One group of consumers is doing well. They have rising incomes, and they can afford the surging home prices, the surging health-care costs, and the surging new-vehicle prices,” he wrote. “There are other consumers whose incomes have not budged much. They have jobs but are living paycheck to paycheck, and not because they’re splurging but because, at their level of the economy, prices of basic goods and services have run away from them.”
Richter said this group of people is getting hit by nosebleed costs in health care, education, and housing to the point where they’re getting “strung out.” They’re just not benefiting from bigger paydays and the fact that stocks are soaring.
He used this chart to illustrate his point:
As Richter’s numbers on the chart show, the rate of credit card balances that are 30 days or more delinquent at the 4,500 or so commercial banks that are smaller than the top 100 banks spiked to 7.05% in the fourth quarter, the highest delinquency rate in the data going back to the 1980s.
Meawnhile, the delinquency rate at the biggest 100 banks was at 2.48%.
Richter explained that the big banks use generous offers to go after consumers with high credit scores. “Their special offers rope in the lion’s share of consumers with top credit scores,” he said. The smaller banks, however, don’t have the same resources that the bigger banks have, but can instead offer subprime customers a card with few incentives that charges a hefty 30% interest rate.
Richter says that this is a clear sign the economy is working for those higher on the income spectrum and leaving the lower earners to suffer.
“During the Financial Crisis, delinquencies on credit cards… were soaring because over 10 million people had lost their jobs and they couldn’t make their payments,” he wrote. “But these are the good times… And yet, there are these skyrocketing delinquency rates in the subprime subset of credit cards and auto loans. It means these people are working, and they’re falling behind their debts.”
So yes, while it’s true that rising stocks, home prices, investment properties, etc. are lining the pockets of the haves, the have-nots, according to Richter’s take on credit-card delinquencies, just keep getting squeezed.
“That’s the bifurcation that we’re seeing in the chart,” he said.
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