The Federal Reserve’s latest nationwide survey of business conditions has found that the coronavirus outbreak has begun to affect tourism and disrupt manufacturing chains in parts of the United States.
If the disease known as COVID-19 becomes a global pandemic, economists expect the impact could be much worse, with the U.S. and other global economies falling into recession.
Orders to U.S. factories for big-ticket manufactured goods were pulled down by decreased demand for cars, auto parts and military aircraft, but the category that tracks business investment rose significantly.
Service providers and manufacturers are noting reluctance among clients to place orders amid the global virus scare.
Among the first tangible impacts in the U.S. is a decline in the number of Chinese tourists. Visitors from China represent a lucrative market for American airlines, hotels, luxury retailers and entertainment venues.
It was a slight improvement over December, as unseasonably warm weather boosted sales at hardware stores and furniture stores.
Jerome Powell told Congress on Tuesday that the Fed is monitoring developments stemming from the coronavirus, which he said “could lead to disruptions in China that spill over to the rest of the global economy.”
U.S. businesses sharply cut the number of open jobs in December for the second straight month, an unusual sign of weakness in an otherwise healthy job market.
Productivity, a key factor needed to boost living standards, has been lagging for most of this record-long expansion, now in its 11th year.
If much of industrial China remains on lockdown for the next few weeks, Western retailers, auto companies and manufacturers that depend on Chinese imports will start to run out of the goods they depend on.
China’s central bank announced plans Sunday to inject 1.2 trillion yuan (about $173 billion) into the economy to cushion the shock to financial markets from the outbreak of the new virus when trading resumes Monday.
Americans’ pay and benefits rose at a solid pace last year, but at a slightly slower rate than in 2018, the Labor Department said Friday.
The dangerous virus spreading through China threatens a wide range of industries with ties to the world’s second largest economy.
For the whole year, GDP increased 2.3%, the weakest performance in three years and a slowdown from a 2.9% gain in 2018.
The Federal Reserve sketched a mostly positive picture of the U.S. economy after its latest policy meeting. It also repeated its pledge to “monitor” the world economy, which may be held back in the coming months by China’s viral outbreak.
The increase, which followed a more moderate advance in December, reflected a more positive assessment of the current job market and increased optimism about future job prospects.
The latest survey by the National Association for Business Economics released Monday found economists are slightly more optimistic about economic growth than they were three months ago, and most foresee sales at their companies remaining solid.
In its annual report ahead of the World Economic Forum in Davos, financial services group PwC said climate change and environmental issues are ranked by chief executives as the 11th biggest threat to their companies’ growth prospects.
A bright spot was the U-6, or underemployment rate, which fell to 6.7 percent, according to Bloomberg News. This level was lower than at any point since at least 1994.
Confidence among Americans surged to the best level since October 2000 on brighter views of the economy and finances, adding to signs that consumers will continue to underpin a record-long expansion.
