'Black swan' coronavirus to slam economy 10 times harder than hurricane
Chinese lockdown slashed work hours by 40 billion
The accelerating spread of the coronavirus is taking an unexpected toll on the global economy, making it a black swan event, according to Alibaba CEO Daniel Zhang.
The number of new cases surged by more than 15,000 to at least 59,804 Thursday after Chinese authorities began using a new reporting method. Additionally, the death toll climbed by 254 to 1,367.
“The outbreak is having a significant impact on China’s economy and may potentially affect the global economy,” Zhang said on a company earnings call, explaining his use of the term "black swan," popularized in Nassim Taleb's book of the same name about catastrophes so unlikely they are completely unforeseen.
“The temporary hit from the virus outbreak should be about 10 times as large as the disruptions from a major U.S. hurricane,” wrote Zach Pandl, a strategist at Goldman Sachs. He says the virus’ outbreak, which has paralyzed economic activity in China, will reduce annualized global output by 2 percentage points.
The disease has already led to the lockdown of more than 60 million people in China, and caused Beijing to extend the Lunar New Year holiday break for scores of state-owned enterprises, resulting in at least 40 billion missed hours of work, according to Pandl.
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Among the provinces affected was Hubei, which is home to Wuhan, the epicenter of the outbreak, and accounted for 4.6 percent of the country's GDP last year, according to a note from JPMorgan Chase's China equity strategy team. The 48,000 cases there account for the vast majority of China's total.
Workers produce face masks in a textile company in Qingdao, in eastern China's Shandong Province. (Liang Xiaopeng/Xinhua via AP)
A number of U.S. companies, including Apple, Disney, McDonald’s, Starbucks and Tesla, have temporarily shuttered, or reduced operations in the country.
Additionally, American, United and Delta airlines have grounded flights to and from China through late April, choking off a not insignificant source of consumer spending as Chinese tourists account for as much as 0.35 percent of global gross domestic product growth.
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In his semiannual testimony before Congress this week, Federal Reserve Chairman Jerome Powell said the central bank is “closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the world.”
Economists at J.P. Morgan last week cut their U.S. first-quarter growth estimate by 0.25 percentage point to 1 percent as a result of weaker exports to China. They see the U.S. economy snapping back to growth of 1.8 percent in the second quarter.
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“The Wuhan coronavirus should ultimately be just a speedbump for the global economy, but it will be a very large one,” Pandl said.