The virus outbreak increased the chance Beijing doesn’t comply with all of the trade deal terms

The impact of the coronavirus outbreak in China on U.S. economic growth will be negligible and short-lived, according to economists in a Reuters poll who nonetheless now say risks to their forecasts are skewed more to the downside. The outbreak has also significantly increased the chance Beijing doesn’t comply with all of the terms of a Jan. 15 initial trade agreement signed with Washington, potentially reigniting a damaging trade war between the world’s two largest economies.

Still, medians from the Feb. 10-19 Reuters poll of over 100 economic forecasters found the overall U.S. economic growth outlook for this year unchanged compared with last month. The forecast for growth in the current quarter was reduced just 0.1 percentage point to a seasonally adjusted annualized rate of 1.5% – already slow, even by recent standards. The economy was then expected to grow 1.8-2.0% each quarter until end-2021.

In that survey, which was conducted before the World Health Organization declared the coronavirus a global public health emergency, 56% of economists said the risks to their U.S. growth views were more to the upside. However, as the outbreak spread, that has switched around to nearly 70%, or 33 of 48 respondents now saying the opposite. Around 75,000 people have been reported as carriers of the virus globally, with over 2,000 confirmed dead.

Despite these risks, the likelihood of a U.S. recession in the coming year only edged up to a median 23% from 20% in January. While the consensus showed the Fed would keep rates unchanged at 1.50%-1.75% at least until the end of next year, Reuters analysis showed nearly 40% of economists polled now expect at least one rate cut at some point this year.

U.S. economy to dodge coronavirus blow, but risks to downside, Reuter, Feb 20