U.S. seen taking economic hit as coronavirus spreads
- The spreading coronavirus is likely to slow U.S. economic growth in the first quarter, Goldman Sachs says.
- The U.S. impact is chiefly from a big drop in Chinese tourists visiting America and declining domestic exports to China.
- While Commerce Secretary Wilbur Ross has said the coronavirus could help bring back jobs to the U.S., the impact will likely initially hurt American businesses, economists warn.
Although the coronavirus remains largely confined to China, the outbreak's economic impact is rippling far and wide. The epidemic will likely reduce U.S. economic growth in the first quarter by 0.4 percentage points to around 1.6%, according to Goldman Sachs.
That's down from a previous Goldman forecast for growth of 2% for the first three months of 2020, The bank's economists cite an expected drop in Chinese tourism in the U.S. and a decline in domestic exports to China as the chief causes for slower growth here.
Economists at Goldman and elsewhere have looked at the impact of the global SARS outbreak in 2002 and 2003 as a baseline for estimating the potential fallout from the new coronavirus. A major difference, however, is that China's economy has grown almost 10-fold since the earlier health crisis and is today a major engine of global growth. As with the U.S., China's economic problems are also the world's.
As a result, fears of contagion are upending sales and operations for American corporate giants ranging from Apple, Google and Tesla to McDonald's, Starbucks and Royal Caribbean. And despite efforts by the Trump administration to decouple the U.S. and Chinese economies through protectionist trade policies, the countries are ever more economically interconnected.
"U.S. exports of travel and transportation services to China — travel and tourism by Chinese in the U.S. — have grown substantially since [SARS]," Goldman chief economist Jan Hatzius wrote in the report.
Meanwhile, the SARS outbreak may no longer serve as a useful yardstick for the potential economic impact, with the number of confirmed novel coronavirus cases in China now topping the number of global SARS cases in 2003.
There were 8,098 confirmed cases of SARS during that outbreak, according to CBS News' Ramy Inocencio. Almost 10,000 mainland Chinese are known to be infected from the coronovirus, while cases have shown up in 22 other countries. By Friday morning, the flu-like virus had killed at least 213 people, all of them in China.
Not surprisingly, the virtual lockdown of as many as 50 million people in China is quickly taking a toll on that country's economy.
"The measures taken by the government and the public to limit transmission are having a significant economic impact," Capital Economics chief Asia economist Mark Williams wrote on Thursday. "Passenger numbers were sharply weaker over the Lunar New Year, usually a peak period for tourism. Many businesses have been told to stay closed indefinitely."
The State Department is now warning Americans to avoid all travel to China due to the "rapidly spreading" coronavirus outbreak, following the World Health Organization's designation of the outbreak as a global public health emergency.
Airlines around the world are canceling or suspending flights to China amid the growing outbreak and a sharp drop in demand for travel to the country. Among the airlines scaling back are American Airlines, Delta Airlines, United Airlines, Air Canada and British Airways.
By contrast, if Chinese authorities are able to contain the coronavirus fairly quickly, as many experts hope, the economic damage may be temporary. Goldman Sachs predicted the U.S. is likely to rebound in the second quarter if the contagion is halted.
One Trump administration official thinks the coronavirus could ultimately pay off for American workers. In a Thursday morning interview with Fox Business, Commerce Secretary Wilbur Ross predicted the infection will eventually "help to accelerate" the return of jobs to the U.S. from China if American businesses reroute their global supply chains in response to future pandemic threats.
Ross's comments were criticized by public health experts. Infectious diseases "threaten all of us," Sandro Galea, dean of the School of Public Health at Boston University, told the Washington Post.
