Experts grappling with how to measure coronavirus blow to economy

Medical staff working in an isolated intensive care unit in a hospital in Wuhan, Hubei province, China, on Feb 6, 2020.
Medical staff working in an isolated intensive care unit in a hospital in Wuhan, Hubei province, China, on Feb 6, 2020.PHOTO: EPA-EFE

SINGAPORE (BLOOMBERG) - It's a mad scramble for the best data: Economists are grappling with ways to gauge the real-time impact of the coronavirus on the world economy, even as the outbreak continues to confound forecasters.

Store closures, flight-tracking websites, factory shutdowns and the latest numbers on infections and fatalities are just some of the high-frequency data points economists are scouring for clues on the hit to growth.

"To track the impact of the virus on the global economy, we have had to look at indicators I have never looked at before in my 25 years of doing macroeconomic forecasting," said Torsten Slok, chief economist for Deutsche Bank.

We asked a group of economists how they're tracking the fallout. Here's a snapshot of their responses:

Torsten Slok, chief economist for Deutsche Bank

Understanding the impact of the virus is all about identifying the transmission channels through which it will impact the global economy, and those include: global tourism, supply chain disruptions, Chinese consumer spending, lower commodity prices, and wealth effects from global lower stock prices, with the last effect probably being more important than the others combined. Put differently, the level of global anxiety and the impact of the "fear factor" in markets is probably what we should worry most about.

Rob Carnell, chief economist for Asia Pacific at ING Groep NV

My daily routine has changed: I now check the latest World Health Organization situation report and supplement that with Worldometer's coronavirus count.

Most important for me now are the new cases of non-China infection, as these are now either from encounters with Wuhan/China tourists, evacuated residents from Wuhan or community transmission. It is really the first and third of these that may shed light on whether this virus is going to go global and, therefore, if we have to take a much dimmer view on what impact this will have on the global economy than just factoring how many fewer tourists will arrive in Thailand.

Ben Emons, managing director of macro strategy at Medley Global Advisors

I expect the first signs of the virus impact on local economies to show up between February 20 and February 25, when Taiwan export orders, Australia PMI, Thailand and Hong Kong import data are released. A change in product inventories from Chinese manufacturers, as well as imports by major auto, retail and durable goods companies, is possibly a signal the production shutdown is affecting the supply chain.

 
 
 
 

A second gauge is shipping and freight rates to and from China. Lastly, imports/exports of materials, textile, and oil products.

Scott Kennedy, China economy expert at the Center for Strategic and International Studies

The number of business days after the end of the formal Lunar New Year holiday in which there is still mass quarantining in Hubei and other Chinese regions. The number of days in which international flights between China and the US and Europe are canceled. The first tells us about China's domestic economy, the latter about international activity. Any signs that US multinational companies in China may move any of their activities - research and development, production, strategic planning -- outside of China.

Chua Hak Bin, senior economist at Maybank Kim Eng Research

We will be tracking the more sensitive sectors - air transport (flights, air cargo), tourism (hotel occupancy, arrivals, receipts) and retail - which will likely be hardest-hit. These sectors will rebound sharply once the virus outbreak is contained and border restrictions are relaxed.

Markets appear to be pricing in a V-shaped recovery, but we are mindful of a possible U. The border controls may stay in place for longer than expected.

Selena Ling, head of research and strategy at Oversea-Chinese Banking Corp.

For the manufacturing sector, supplier deliveries gauges within the manufacturing and electronics PMIs are critical to watch, as any delay or disruptions due to travel curbs and quarantines are likely to show up there first. For the tourism and hospitality sectors, I will be watching the air passenger load factors, the visitor arrival data, hotel occupancy rates, food and beverages, etc.

Tuuli McCully, head of Asia Pacific economics at Scotiabank

Confidence indicators. Also, any large manufacturers' announcements regarding production shutdowns (such as in South Korea) give valuable early insights about the disruptions to supply chains.

Tourism, transportation, automotive industry, petrochemicals (Hubei is a hub for autos and petrochemicals, for instance), and basically any sector that relies on consumer spending.

 
 
 

Richard Moody, chief economist, Regions Financial Corp

We're monitoring guidance from corporations concerning supply chains, production schedules, service cancellations and the like. Manufacturing, travel/tourism, and retail - to the extent imports from China are impacted -- are the main sectors we're concerned about. It will also be important to watch measures of business and consumer confidence to see if they are being adversely impacted.

One thing that makes the impact difficult to quantify is that while the virus may move fast, the economic impacts and them turning up in the data, not so much.

Deborah Elms, executive director of Asian Trade Centre

There are the obvious announcements about the closure of key factories and business operations in China and elsewhere. The increasing lack of air travel in and out of China is also affecting shipping trade, as many of the paper documents that get exchanged before a ship arrives in port are sent by air. If there are no airplanes going, there is also going to be limited shipping. So even if there are products to put on ships and people still working who can get the goods to the boats, the ships may not be able to go anywhere or get offloaded. (The shipping problem is compounded by staff on the boats with the virus who are quarantined.)

Teresa Kong, portfolio manager at Matthews Asia

The gross increase and the net increase in suspected cases. We believe trends in the suspected cases are a leading indicator to trends in the confirmed cases. Recently, we've see a flattening-out of the net increase in suspected cases.

A key indicator to watch will be any new policy from the government regarding prevention of virus spread. For example, if the holiday were to be extended once more, it would have a significant impact on economic activity.