How the Coronavirus Will Show Up in U.S. Economic Indicators

(Bloomberg) --

The coronavirus is about to ripple through a slew of U.S. economic indicators.

While China has been ground zero for the virus and its economic impact, the U.S. is starting to see effects: companies are already reporting lower demand from abroad, tourism is slowing and supply chains are in flux.

Read more: Bloomberg Economics on Modeling a $2.7 Trillion Pandemic

As the death toll rises, economists say it's difficult to calculate the hit to output: no one knows just how long it will last, how much worse it will get or how U.S. consumers -- buoyed by an otherwise strong economy and labor market -- will react.

Analysts have used historical events as a starting point, from the SARS and MERS epidemics to natural disasters in the U.S. and Japan. In all cases, business conditions took months to return to normal, so even if the coronavirus is contained soon, it will continue to reverberate through data for some time.

Here are the top indicators to watch in coming days and months:

Jobless Claims

Next Report: March 5 and Subsequent Thursdays

Filings for unemployment benefits are typically the first broad distress signal when the economy gets bruised, whether it's a garden-variety recession or natural disaster. Claims have been hovering near a half-century low for the past year, though they could rise as soon as Thursday's weekly report, according to Gus Faucher, chief economist at PNC Financial Services Group.

Several groups have canceled conferences in the U.S., and restrictions on travel into the country -- particularly from China -- are likely to slow business, prompting employers to fire temporary or part-time workers. Chinese tourists are the fifth-largest group of visitors from abroad, with about 3 million visiting in 2018, National Travel and Tourism Office data show.

If businesses see sustained virus impacts, “they may start adjusting their payrolls now by laying off workers,” said Ryan Sweet, head of monetary policy research at Moody's Analytics.

At the same time, it's unclear if any employment changes will be big enough to show up in claims or could just take a long time, according to Bank of America Corp.'s Michelle Meyer.

International Trade

Next Report: March 6 (January), March 26 (February goods)

Preliminary figures already showed declines in shipments in January, though trade was set to recover after President Donald Trump inked the phase one agreement with China early this year. But shortly after signing, Chinese officials began to seek flexibility on their pledges as the virus threatened the Asian nation's economy.

On Monday, a gauge of U.S. manufacturers' imports plummeted to the lowest level since 2009 while another index reflected supply-chain disruptions. Look for trade impacts to also show in capital-goods orders and shipments, as well as greater volatility of import and export prices.

Consumer Sentiment

Next Reports: March 5 and 12 (Bloomberg), March 13 (Michigan)

So far, two months of coronavirus headlines haven't rattled Americans, according to confidence surveys including the University of Michigan's sentiment index, which in February hit the second-highest level of the expansion.

But the next readings -- including the Bloomberg Comfort Index due Thursday -- will be the first to fully reflect last week's stock-market plunge. In addition, consumers now must confront more U.S. outbreaks and warnings from agencies such as the Centers for Disease Control and Prevention.

Sentiment is “being threatened given the violent sell-off in markets and the warning from the CDC about the inevitability of the disease” hitting the U.S., according to Bank of America.

Retail Sales

Next Report: March 17

Faltering sentiment doesn't bode well for consumer spending, which accounts for the majority of the economy and has driven growth for several quarters amid weakness in business investment.

Economists are split on the potential impact, which largely depends on the length and severity of the outbreak. If the situation worsens, stores could close and foot traffic could decline, hitting luxury goods and potentially hurting supplies for the crucial back-to-school shopping period later this year, according to Cowen & Co. analyst Oliver Chen.

But some vendors could get a near-term boost as shoppers stock up at big-box stores and buy more from online retailers such as Amazon.com Inc. Meanwhile, supply-chain disruptions could boost prices. Target Corp. could give some early indications of trends when it reports quarterly results Tuesday.

Industrial Production

Next Report: March 17

America's manufacturers were just starting to regain their footing after last year's slump when the virus hit. A key industry gauge slid more than expected in February as new orders fell.

Federal Reserve data later this month will give a more detailed view of how the virus rippled through U.S. factories in February. With orders weakening and supply chains gummed up, companies may be pausing investment to gauge consumer demand and clarity on the coronavirus fallout for the broader economy.

In addition to the Fed's industrial production figures, look for the virus impact to show up in other purchasing managers' indexes, as well as manufacturing payrolls in the monthly jobs report, factory orders and shipments.

--With assistance from Reade Pickert.

To contact the reporter on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net

To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns

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