Luxury goods makers, which rely on Chinese consumers who spend big at home and while on vacation, have also been hit. British brand Burberry (BBRYF) has closed 24 of its 64 stores in mainland China, and its chief executive warned Friday that the virus is causing a “material negative effect on luxury demand.” Dozens of global airlines have curtailed flights to and from China.
Even more troubling is the threat to global supply chains. Qualcomm (QCOM), the world’s biggest maker of smartphone chips, warned that the outbreak was causing “significant” uncertainty around demand for smartphones, and the supplies needed to produce them. Already, auto parts shortages have forced Hyundai (HYMTF) to close plants in South Korea and caused Fiat Chrysler (FCAU) to make contingency plans to avoid the same result at one of its plants in Europe.
Economists say the current level of disruption is manageable. If the number of new coronavirus cases begins to slow, and China’s factories reopen soon, the result will be a fleeting hit to the Chinese economy in the first quarter and a dent in global growth. If the virus continues to spread, however, the economic damage will increase rapidly.
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