Administration officials stressed that the work was preliminary and precautionary. While global markets slid Friday, White House economists only see a limited economic impact from the virus on the first quarter of 2020 of about 20 basis points, or 0.2 percentage points. That is largely in line with the predictions of external analysts.
The two officials spoke on the condition of anonymity to discuss internal assessments of the coronavirus. Publicly, White House officials have largely downplayed the potential economic impact on the United States, with White House economic adviser Larry Kudlow saying it will probably only have a “minimal” impact on the economy.
Commerce Secretary Wilbur Ross, though, said the coronavirus outbreak “will help” persuade companies to move operations back to the United States and Mexico, a sentiment that other White House officials have not voiced publicly.
Federal officials on Friday announced unprecedented restrictions on travel to and from China, barring foreigners from entering the United States if they have been in China during the previous 14 days. More than 14,000 people have been diagnosed with coronavirus. More than 250 have died, all in China.
The economic vulnerability is more acute for China, where many businesses have already closed down as consumers stay home. Trade with China still represents a sliver of the mammoth U.S. economy.
“You need something that would cause greater uncertainty such that businesses postpone making new investments and consumers stay home” for the U.S. economy to be hit, said Chris Rupkey, chief financial economist at MUFG in New York. “It’d have to be a much bigger health scare than we’ve seen. It hasn’t reached the magnitude of a true crisis that could put the brakes on growth.”
Some analysts also say that even if the coronavirus continues for one or two quarters, there is unlikely to be more serious long-term damage to the U.S. economy. Combined with a downturn in sales at Boeing, Rupkey said, the virus may shave about three-quarters of a percentage point off economic growth. Gross domestic product rose 2.3 percent last year, so such a dent could be notable.
Federal Reserve Vice Chair Richard Clarida called the virus a “wild card” on Friday but also said that it is unlikely to meaningfully alter the broader economy if resolved within one or two quarters. Economists caution that a slowdown caused by a temporary crisis is usually followed by a significant uptick as the economy stabilizes.