By Calculated risk 2/28/2020 12:41:00
Some readers have asked about the economic impact of the new coronavirus. The answer is it depends on the severity of the epidemic.
Goldman Sachs economist wrote this morning:
Our new baseline scenario relates to the continued slowdown in infections in China, allowing a slow recovery in the high-frequency indicators of economic activity. However, it also includes a secondary supply chain disruption in the global goods production sector, as well as a hit to consumer spending and business activity from the state of the outbreak, far beyond China and other countries(e.g., South Korea and Italy), have been affected so far. Our analysis shows that the effect on the quarter of the year global GDP growth of 5pp in Q1 and 2pp in the 2nd quarter, and then rebounded in the second half by 2020, leaving our full-year global growth forecasts about 2%. All people, etc., which means a brief global contraction that stopped short of outright recession.
We also consider two alternatives. Line scenario assumes that the global spread of the virus brought under control quickly and the supply chain disruption remain mostly does not exist; if so, of global gross domestic product will rebound in Q2, the risk capital market will recover to rise sharply, the Central Bank can stay on hold. The following views assume that the extensive supply chain disruption as well as domestic demand weakness in the global economy. This will involve a sharp sequential contraction of global GDP in Q1 and Q2—i.e. a global recession, may be a radical loosening of monetary policy activities, including the return to the near-zero funds rate after the crisis period.
This is a wide range of results. If the pandemic significantly slow down(maybe due to seasonal), then the economy should recover quickly. However, if the epidemic continues to spread rapidly, and then we can look at the global recession(as well as a huge human tragedy).
Will have a direct impact on travel, not only is Asia(we begin to see the relaxation in our hotel rate). There may be an impact on US consumer spending, especially in high price items such as cars and housing(although a low interest rate is a positive). I hope the areas of Las Vegas will be very difficult for the duration of the health crisis(of the Convention or the cancellation of low attendance)
We need accurate informationEspecially in the number of daily test-positive and negative results And advice from experts on when and how to change our behavior (Social-keep distance, etc.). It is about one of the first acts of the VP for pennies is to the beginning of the experts at the CDC and HHS. This is reminiscent of what happened in 1918.
In 1918, at the beginning of the crisis when government officials tried to put a positive in the bird flu epidemic. From Smithsonian Magazine:
(W)cheats flu bled into American life, public health officials, determined to keep morale high, start to lie.
Back in September, a naval vessel from Boston for the flu to Philadelphia, where the outbreak of disease Naval Hospital. The city’s public health Director,Wilmer Krusen announced that he would”limit the disease to its present limits, and in this we can succeed. No deaths have been recorded. Don’t care whether it is what feeling.”
The next day the two sailors died of influenza. Krusen said they died of”old-fashioned influenza, or grip,”not the Spanish flu. Another health official declared,”from now on, this disease will be reduced.”
The next 14 day sailors died—and one civilian. Every day disease speed up. The daily newspaper assured readers that the flu is not dangerous. Krusen heart of the city, he will”bite infectious diseases in the Bud.”
Now the best data is from the Center for Disease Control and health organizations. I will write more in potential impact as more information becomes available.