How any economic analyst can possibly still be forecasting China's economy will expand during the first quarter of 2020 is almost incomprehensible. Are the analysts doing so incompetent or are they kowtowing to China? The kindest thing I can say about it is that it offers an example of how cautious Wall Street analysts are about going out on a limb and upending the group think consensus.
Here are some examples of these ridiculous forecasts:
According to Forbes, "The UBS China Economics team expects that GDP growth will slow to 3.8% year-over-year in the first quarter"
"Morgan Stanley said on Wednesday the corona virus outbreak in China ... could shave up to 1 percentage point off Chinese growth in the first quarter."
"China's economy will face the brunt of the virus' near-term fallout, with Goldman estimating a 1.6 percentage-point reduction to first-quarter growth."
And this summary from Bloomberg provides more of these insanely optimistic forecasts for only mild drops in China 1st quarter economic growth.
How can a country's economy grow on a year over year basis when the much of it was shut down for over a week due to the extended Lunar New Year holiday. And given the annual Lunar New Year holiday already resulted in a week's shutdown, it reduced the productive weeks in the 1st quarter 2020 to 11 of 13, versus 12 productive weeks last year. So with much of the economy shut down for an extra 8% of the quarter, growing the economy would be unlikely even without the corona virus epidemic.
Due to the extension of the Lunar New Year holiday, production will be significantly reduced at many factories for at least the rest of this month, and possibly into March. Further, the cancellations of airline travel to China by some airlines until late March and other travel restrictions on buyers, engineers, designers, and quality inspectors will have a negative impact on the production of Fall 2020 and Spring 2021 merchandise.
Conclusion
China has taken extraordinary measures to slow down the spread of the novel corona virus. And based on the slowdown in reported cases in both China and the world, they are having a positive impact and have greatly reduced the likelihood of this becoming a pandemic. But it is incredible that any reasonable analyst would think that China's economy could expand during the 1st quarter 2020. The question is how much of a decline will result. These overly optimistic forecasts bring into question the credibility of any and all Wall Street economic forecasts.
