Economic and Industry Implications of the Coronavirus OutbreakFebruary 19th, 2020 by Jordan Scott
The novel coronavirus, also known as COVID-19, has created global unease as health officials in China and around the world work to contain the virus, which has killed more than 2,000 people. It’s still unclear how long the outbreak will last or what its economic implications will be, and if those will impact the glass and fenestration industry.
Many workers were required to stay home following the Lunar New Year to prevent the spread of disease, and strict quarantine guidelines were put in place. It’s expected that manufacturing plants in affected Chinese provinces will see productivity losses as infected workers, quarantines and transportation delays disrupt output, according to insurance expert Randy Brown in an article for Forbes.
One direct impact of the virus on the industry has been China Glass 2020 extending exhibitor deadlines. It’s uncertain if the virus will have further impacts on the trade show. Xinyi Group, a China-based glass manufacturer, has donated around $1.4 million to Laohekou in Xiangyang, Hubei Province, for the purpose of epidemic prevention and control in that city.
“When facing epidemics, we take practical actions to repay the society, fulfill our corporate responsibilities and do our best to support Laohekou in the prevention and control of the epidemic, and to help each other and overcome the difficulties together,” said a company statement.
In a recent report from Morgan Stanley, the chief economist Chetan Ahya said, “Overall, we expect to see temporary weakness in China’s economic data from February to March and, to some extent, in the rest of the world, particularly in economies more exposed to China’s growth dynamics. But, assuming that the virus is contained within two months, and given our view that the fundamental growth drivers are still intact, we should get back onto the recovery path from the second quarter onwards, with global growth rising to 3.5% by the first quarter of 2021.”
In Brown’s article he said that most economists expect China to take a 0.3-1.5% hit to its annual GDP from the virus’ impacts.
On February 6, the country reduced tariffs on thousands of American products as China and the U.S. continue trade negotiations.
Nelson Dong, a senior partner at the international law firm Dorsey & Whitney, pointed out in a statement that Chinese workers’ lost hours will lower national productivity this year, lowering corporate revenues and earnings.
“When all of these adversely affected Chinese companies tally up those losses, that will likely lead to tightened budgets that will lead in turn to lowered purchases, especially of relatively more expensive imported goods. Thus, if China hopes to have any chance of meeting its Phase One agreement import commitments, it has to adjust for those economic headwinds, and so these tariff reductions are probably calculated to reinforce the government’s recent injection of more liquidity into the Chinese financial system,” Dong said.
While many companies are monitoring COVID-19 for economic impacts, Fenestration and Glazing Industry Alliance U.S. codes and regulatory manager Kathy Krafka Harkema says companies should be prepared for potential exposure to the virus.
“With incidents of 2019 novel coronavirus rapidly rising, it’s a good time to consider what would you or your business do if you were exposed to this disease. The threat of the mysterious disease without a cure has already greatly curtailed travel to and from China. The question is whether the disease outbreak will ultimately significantly slow the shipment of goods from China to other countries,” she says. “Since the method of coronavirus disease transmission is uncertain, curtailing travel to and from China and quarantining people who may have been exposed to it may help prevent the spread of the disease. Unlike other diseases, at this time, coronavirus tends to strike more adults in their prime working years, rather than heavily infecting the very young or elderly. That’s another reason to develop or update your company’s emergency preparedness plans because the disease could impact your workforce.”
The death toll from COVID-19 has more than doubled that of SARS, a different strand of coronavirus that originated in China in 2002. While not as deadly as the flu, Krafka Harkema says it’s important to remember that there is no vaccine for COVID-19 and to be prepared in case workers get sick or shipments are impacted.
“Think about what might happen if key members of your team were suddenly quarantined for weeks. Do you have designated backups in place? Likewise, it’s important to consider the potential impact on your business if goods physically shipped from China into your country are delayed or even stopped in the future. How would you deal with that? Do you have alternate supply chain sources in place? Now’s also the time to familiarize yourself with and put into place good sanitation and hygiene practices at work and at home, which can help reduce the incidence of many types of disease,” she says. “Check out resources designed to help answer questions about coronavirus available here from the U.S. Centers for Disease Control. Existing Occupational Safety and Health Administration (OSHA) workplace safety regulations may also help provide guidance. Find OSHA’s coronavirus resources here.