Will Coronavirus Infect The Global Economy?

The world economy looked set to benefit from a U.S.-China trade deal, which rolled back some aspects of trade to the pre-trade-war status quo.

Now, the prospects of a fragile stabilization of the global economy could be on the ropes due to the spreading outbreak of the coronavirus.

How will the coronavirus impact your portfolio? For the latest forecasts, stay current with regular updates from Investing Trends’ chief economist and editor, Rich Meyers.

Certainly the virus will devastate Chinese tourism, and likely Asia tourism.

Retail could be damaged as well. Already, Starbucks (NASDAQ:SBUX) has closed shops across the virus’ Hubei Province epicenter. McDonald’s (NYSE:MDC), Yum Brands China(NYSE:YUMC), and WeWork China are following suit.

But, the real impact could be on industrial production.

Global companies such as Honda Motor Co. (NYSE:HMC) and Nissan Motor Co. (OTC:NSANY) are among those evacuating workers from the affected area, while theme park operators, movie theaters, retailers and restaurant chains are suspending or curtailing operations to protect workers.

“Complicated supply chains and just-in-time production could mean that production outages in Wuhan factories have broader spillover effects,” said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings.

And, Bloomberg Economics Chief Economist Tom Orlik wrote, “A larger role for consumption, tourism, and other leisure activities, massive increase in travel, and potential for panicked markets to deal a blow to sentiment, mean the risks are larger.”

The crisis also hit during U.S. companies’ peak earnings season. As of Jan 28, after a light sell off in the previous week, U.S. stock markets were up slight.

But, it remains watch-and-wait across the global economy.

It’s been a month since China first reported the outbreak on Dec. 30. To date the majority of coronavirus infections and deaths are centered in Wuhan, which is the capital of Hubei Province.

Bloomberg reported that one of the first deaths there was a 61-year-old man, who was also quite ill to begin with.

The scary part is that he frequented the popular Huanan Seafood Wholesale Market. It’s a traditional market where crowds of shoppers, freshly slaughtered and unwrapped meat and live animals commingle in close quarters.

As Bloomberg described it, this “wet market,” is home to “hens stuffed in metal cages and snakes wriggling in plastic buckets, often sitting alongside garbage and rotten food.

Clearly a breeding ground for pathogens, and perhaps a coronavirus that spreads throughout the global economy.