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Economic fallout from coronavirus deepens, threatening tech, retail, auto supplies

The coronavirus casts a widening shadow across the U.S. economy.

The outbreak in China is dampening visits by Chinese tourists, raising the prospect of shortages and price increases for iPhones and other products, and disrupting parts deliveries for carmakers.

“It’s consequential,” Diane Swonk, chief economist of Grant Thornton, says of shipment delays and product shortages. “It’s going to happen.”

The effects on the economy and commerce have been modest, but the toll is likely to grow if factory shutdowns in China persist and the outbreak continues to spread rapidly. Chinese authorities say the number of new cases has dropped, but global health officials are cautious, noting thousands of infections could go undetected.

The number of coronavirus cases worldwide has surged to nearly 75,300, mostly in China, and the death toll has topped 2,000. There have been 29 cases in the USA.

Under the most likely scenario, which assumes 100,000 to 150,000 total cases, “I think it’s a modest hit to the (U.S.) economy,” the effects of which will play out by summer, says Mark Zandi, chief economist at Moody’s Analytics.

But as U.S. growth is forecast to slow amid sluggish activity overseas, lingering trade jitters and Boeing airplane production snarls, “we’re teetering on the edge of falling off the rails,” Zandi says.

A big wild card is that consumer fears “will escalate and push households into a defensive mode” that reduces their spending and, in turn, discourages business investment, says economist Bob Schwartz of Oxford Economics.

A wider coronavirus outbreak that infects 250,000 to 300,000 people globally almost certainly would topple the nation into recession, Zandi says.

Lost tourism represents the biggest threat. About 3 million Chinese people visit the USA each year, spending about $6,500 per trip, 50% more than typical international tourists, according to Tourism Economics, Moody’s and the U.S. Travel Association. Visits from China will probably fall by about 30% this year, an economic loss of about $5.8 billion, Tourism Economics estimates.

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