Barista economy makes Australia COVID-19 whipping boy

We saw it in the CBA Flash PMI this morning:

The latest Commonwealth Bank Flash Composite PMI® pointed to a much stronger contraction of the Australian private sector during April, with the decline particularly severe at service providers. The coronavirus disease 2019 (COVID-19) led new orders to fall at a steep pace, with employment scaled back markedly as a result. Both input costs and output prices decreased, but this was reflective of trends in the service sector as manufacturing inflation trends accelerated.

Manufacturing is seeing a garden variety recession. But services are seeing Armageddon.

The same pattern is apparent in Japan today with services much worse hit:

We will see this pattern repeated worldwide.

The difference between Australia and just about everywhere else is this:

Our manufacturing output is so small at 5% of value-added that it offers no protection against a people-to-people shock. That could have been an illness, sudden degloblisation, war, commodity crisis, or something else.

COVID-19 has exposed the much-celebrated Australian services economy – that sells nothing but houses and cappuccinos to one another – as little more than an imbalance that will now violently adjust.

An entire generation of economists should be hung out to dry.