As the new coronavirus spreads around the world, and confirmed cases and deaths mount, economists are increasingly concerned about the impact on the U.S. economy.
In a recent report to Congress, the Federal Reserve warned that disruptions from the coronavirus could spill over into the global economy, creating new risks to the U.S. And Wall Street lender Goldman Sachs estimates that the virus will cut as much as half a point off of U.S. economic output in the first quarter of 2020.
As an expert in supply chain management, I’ve studied how dependent U.S. companies have become on manufacturers of parts and products in China. But that is only one of many ways the outbreak could hurt the U.S. economy. Here, I list three – as well as something that could mitigate the impact.
1. Sales to China
China is one of the largest markets for U.S. products, especially electronics and fashion.
Many cities and provinces have told businesses to stay closed, and residents throughout China have been staying off the streets. That has resulted in deserted shopping centers with closed stores, including those run by American fast food companies and fashion retailers, such as Nike, Starbucks and McDonald’s, to name a few.
2. Constrained and disrupted supply chains
The Chinese economy has effectively shut down, which is taking a toll on U.S. manufacturers through their supply chains.
Manufacturers that use components in their products that are mostly sourced from infected areas in China such as Wuhan, where more than 500 car parts manufacturers operate, have two options: find alternative sources outside of China or shut down production.
Automakers including Tesla, Ford and Volkswagen have shut down plants in China. Hyundai has gone a step further and temporarily closed production lines in South Korea because of a shortage of parts, a hint of more trouble for other manufacturers.
Chinese tourism has in recent years become an important driver of U.S. GDP.
Then the trade war arrived, and that caused a large drop in Chinese visits. Now, the coronavirus is expected to deal another blow to the industry. Many airlines have have canceled all flights in and out of China, and the Trump administration has imposed travel restrictions that bar any foreign national who has recently traveled to China from entering the U.S.
The number of visitors coming to the United States from China could drop by as much as 28% in 2020, which could translate into US$5.8 billion in less spending this year and $10.3 billion less through 2024.
Trade war’s silver lining
One consequence of the U.S.-China trade war is that many U.S. companies have moved all or most of their manufacturing facilities out of China to other countries in the region, such as Vietnam, Taiwan, Bangladesh and South Korea.
In a May 2019 survey, about 40% of American Chamber of Commerce member companies said they have relocated manufacturing facilities outside China or were considering doing so.
This could mitigate some of the impact as a result of disruptions in mainland, but the outbreak is spreading to other countries in Asia – though not as fast as in China – so their new manufacturing facilities could still be affected.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
