Kiplinger\'s Personal Finance - 04.2020

AHEAD

18 KIPLINGER’S PERSONAL FINANCE^ 04/2020

at Tiffany and Nike, too, ac-

cording to Morgan Stanley.

Supply chains are disrupted.

Many parts for smartphones

and cars are made in China.

Qualcomm, a leading smart-

phone chip maker, warned

that the outbreak was caus-

ing “significant” uncer-

tainty around smartphone

demand and the supplies

needed to produce them.

Apple warned its March

quarter sales would be

lower than expected be-

cause of a “slower return

to normal” production of

its smartphones at China’s

factories. Other companies

at risk of supply-chain set-

backs include Best Buy,

Floor & Décor Holdings,

Gap and General Motors,

reports Morgan Stanley.

Travel curbs hurt, too. Dozens

of airlines have reduced their

f lights to China through

March or April, including

American, Delta, Lufthansa,

Swiss Airlines and United.

At the height of SARS, air-

line passenger volumes

were down 35%, according

to the International Air

Transport Association.

The good news: Once the pace

of contagion slows, the econ-

omy should rebound... SARS

was short-lived, and ana-

lysts expect the same for

the current coronavirus.

S&P Global expects China’s

economy to expand by 6.4%

in 2021. GETTYIMAGES (2)

BRIEFING

INFORMATION ABOUT THE MARKETS AND YOUR MONEY.

CORONAVIRUS INFECTS

THE GLOBAL ECONOMY

D

aily updates about the

COVID-19 virus are rat-

tling nerves everywhere.

Brace yourselves. We could

be in for several months of

disquiet. The last viral out-

break to originate in Asia,

Severe Acute Respiratory

Syndrome, or SARS, lasted

roughly six months.

The virus will nip China’s eco-

nomic growth... S&P Global

cut its forecast of 5.7%

growth in Chinese gross

domestic product to 5%.

But the firm cautioned it

was less confident in its

disruptions.” In the U.S.,

“economic fundamentals re-

main sound and the Federal

Reserve stands ready to

take action,” says Capital

Group U.S. economist Jared

Franz. The virus should not

derail his forecast of 2% U.S.

growth in 2020, he says.

Luxury brands are suffering.

In 2019, Chinese shoppers at

home and abroad accounted

for 33% of the luxury-goods

industry, according to Burb-

erry. The British luxury

brand warned in February

that the virus is causing a

“material negative effect on

luxury demand,” and it tem-

porarily closed 24 of its 64

stores in mainland China.

Sales in China account for

a large portion of revenue

figures than usual due to

continuing uncertainty over

the severity of the outbreak.

If it drags on, Morgan Stan-

ley analysts expect a cut of

as much as 1.1 percentage

points in China’s growth.

...and the rest of the world will

feel it, too. China accounts

for roughly 20% of world-

wide growth, so the global

economy will feel a bite, too,

S&P said, thanks to “sharply

reduced tourism revenues,

lower exports of consumer

and capital goods, lower

commodity prices, and

industrial supply-chain