Coronavirus Fears Reverberate Across Global Economy

Coronavirus Fears Reverberate Across Global Economy

Investors, fearing that the spread of the coronavirus is tipping the global economy into a recession, handed the stock market its largest weekly loss since the 2008 financial crisis on Friday amid worries that one of the longest economic expansions in history may be coming to an end.

With the virus now detected in at least 56 countries, companies are readjusting their annual profit expectations, economists are lowering their forecasts for global growth and policymakers have signaled that they are ready, if needed, to act to stabilize the economy.

As the stock market dropped again on Friday, Jerome H. Powell, chair of the Federal Reserve, issued a short statement affirming that the central bank would use its tools and “act as appropriate to support the economy.” After the Fed’s statement, the S&P 500 pared some of its losses, closing the day down 0.8 percent, though the index remained down 11.5 percent for the week.

Still, there were stark signs that the economic fallout from the virus had started to take hold, as retailers and home builders reported delays in shipments from China, Amazon was running low on hand sanitizers sought by a jittery public and financial regulators began monitoring whether American businesses were starting to have difficulty borrowing money.

“This feels different than the other market crisis in that it involves disruptions to daily life,” said Mark Zandi, chief economist at Moody’s Analytics. “This isn’t financial. This is not some obtuse thing on a screen. Schools may close. I may not be able to get pasta or oatmeal.”

What began a few weeks ago as relatively tepid concerns on Wall Street about disruptions to global supply chains has mushroomed into deep worries about the possibility that millions of people around the world may have to cut back on shopping, travel and restaurants to avoid contracting the virus.

The uncertainty of such situations has made it difficult for experts to predict the damage to the economy. Some are offering probabilities that the American and global economies will slip into recession. Moody’s Analytics said this week that the odds of that happening had risen to four in 10. Capital Economics pegged it much lower, at one in 10.

On Friday, Morgan Stanley researchers outlined three possible situations in a note to clients. In the most benign, the American economy does not slow at all in 2020 from previous forecasts, as the virus remains largely confined to China and Chinese factory production ramps back up in the coming months.

In the most severe scenario, where the virus spreads more widely across countries and sectors of the economy, growth slows to a near halt in the United States for several quarters this year, leaving 2020 with a 0.5 percent growth rate over all. “The risks are clearly skewed to the downside until the outbreak is contained,” researchers at Goldman Sachs said in a note this week.

There was clear evidence in recent days of the economic fallout. Toll Brothers, the luxury home builder, said some home sales to Chinese buyers had been postponed and shipments of fixtures from China delayed. The shoemaker Steve Madden said some shipments would be delayed by three weeks as its Chinese factories struggle to operate with fewer workers.

The Coronavirus Outbreak

  • Answers to your most common questions:

    Updated Feb. 26, 2020

    • What is a coronavirus?
      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.
    • What if I’m traveling?
      The C.D.C. has warned older and at-risk travelers to avoid Japan, Italy and Iran. The agency also has advised against all nonessential travel to South Korea and China.
    • Where has the virus spread?
      The virus, which originated in Wuhan, China, has sickened more than 80,000 people in at least 33 countries, including Italy, Iran and South Korea.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is probably transmitted through sneezes, coughs and contaminated surfaces. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • Who is working to contain the virus?
      World Health Organization officials have been working with officials in China, where growth has slowed. But this week, as confirmed cases spiked on two continents, experts warned that the world was not ready for a major outbreak.