Coronavirus outbreak

Experts grappling with ways to measure impact on world economy

It is 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 Dr Torsten Slok, chief economist for Deutsche Bank.

We asked a group of economists how they were tracking the fallout. Here is a snapshot of their responses:

TORSTEN SLOK, CHIEF ECONOMIST, 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, ASIA-PACIFIC AT ING GROUP

My daily routine has changed: I now check the latest World Health Organisation 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 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 Feb 20 and Feb 25, when Taiwan export orders, Australia's Purchasing Managers' Index (PMI), Thailand and Hong Kong import data are released.

A change in product inventories from Chinese manufacturers, and imports by major car, 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 and exports of materials, textile and oil products.

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 OCBC BANK

For the manufacturing sector, supplier deliveries gauges within the manufacturing and electronics PMIs are critical to watch, as any delays 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, et cetera.

DEBORAH ELMS, EXECUTIVE DIRECTOR, 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 aeroplanes 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.)

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 10, 2020, with the headline 'Experts grappling with ways to measure impact on world economy'. Print Edition | Subscribe