/Capitol Report: Coronavirus and the economy: U.S., world bracked for shockwaves, threat of recession

Capitol Report: Coronavirus and the economy: U.S., world bracked for shockwaves, threat of recession


How badly is the coronavirus epidemic damaging the global economy? How much is the resulting COVID-19 illness hurting U.S. businesses and consumers? Here’s an ongoing MarketWatch update on what the economic VIPs are saying.

•Severe restrictions to slow the spread of the coronavirus are taking a big toll on the global economy and it’s going to get worse before it gets better, economists say. Italy is already in lockdown, for example, and the U.S. has now banned flights from Europe.

Read: U.S. wholesale inflation sinks on lower oil prices as coronavirus hinders travel

Moody’s Analytics cuts its growth forecast for the world economy to 1.9% from 2.6%. IHS Markit slashed its estimate to 1.7% from 2.5%.

How bad is that? The global economy has been expanding an average of 3.5% annually in recent years. So that would be a big hit.

Wall Street already seems to be anticipating the worst. The Dow Jones Industrial Average

DJIA, -7.48%

 has shed 8,000 points in the past week and triggered a bear market.

•The U.S. could post its first decline in growth in six years. Credit Suisse, for example, chopped its second-quarter GDP forecast to -0.9% from 2.8%.

Economists are split on whether the first recession since 2007-2009 is inevitable. Some say the economy was strong enough before the viral outbreak to withstand a recession if the crisis passes in the next few months. But if it drags on the likelihood of a downturn rises sharply.

•Three-quarters of U.S. businesses say their supply chains have been disrupted by the coronavirus, a new survey shows. And more expect to face problems soon.

Companies say it’s taking twice as long to obtain supplies and it’s also gotten harder to get materials shipped to the United States, according to the Institute for Supply Management. Some firms have trimmed their sales forecasts and others may follow suit soon.

“The story the data tells is that companies are faced with a lengthy recovery to normal operations in the wake of the viral outbreak,” said Thomas W. Derry, the ISM’s chief executive.

• Companies all over the world have become alarmed by the rapid spread of the coronavirus and the damage it’s caused. A weekly survey by Moody’s found that business confidence has fallen sharply to the lowest level since the 2008 financial crisis. Only 6% of businesses said conditions are improving.

“The virus has slammed business confidence,’ said Mark Zandi, chief economist at Moody’s Analytics.

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