Capitol Report: How much will COVID-19 hurt the U.S. economy? It’s anyone’s guess right now

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The coronavirus, officially renamed COVID-19, represents a distant threat to the U.S. economy right now, but it could hit closer to home if it keeps spreading.

Nobody really knows how much the coronavirus will hurt the U.S. economy, but hurt it, it almost certainly will.

A handful of Wall Street firms have taken a stab at it, estimating the virus could cost the U.S. economy from a tenth to a half of a percentage point in the first quarter.

No big deal, in other words, but no small matter, either.

Even then, most forecasters assume the threat will recede soon and U.S. will quickly recover any lost ground.

“Our base case is that the virus does not become a full-blown pandemic, and that the short-term economic impact is noticeable but manageable,” said managing director Sam Bullard of Wells Fargo.

The Federal Reserve, the government’s steward of the U.S. economy, is just as uncertain. Central bank Chairman Jerome Powell told Congress this week the Fed is monitoring the spread of the virus — since renamed COVID-19 by the World Health Organization.

“We’ll be watching this carefully,” Powell lawmakers on Tuesday. “The question for us, really, is what will be the effects on the U.S. economy? Will they be persistent? Will they be material? That’s really the question.”

For now investors have given their answer on the potential harm.

The stock market DJIA, +0.94% SPX, +0.65%  has recovered lost ground after the outbreak of the virus and clawed back to record highs. News reports suggesting the number of new cases in China has slowed has added to the recent momentum.

Read: Stock market trades in record territory as number of new coronavirus cases falls

The odds of the U.S. escaping unscathed, however, aren’t very high.

Austere measures such as quarantines used by the Chinese government to contain the spread of the virus have shut down large chunks of the second-largest economy in the world. China accounts for one-fifth of global gross domestic product, it’s the world’s largest manufacturing hub and it’s one of the largest trading partners of the United States.

“No one believes China will achieve 6% growth this year anymore. The question is, how long will the disruption last?” said chief economist Chris Low of FHN Financial.

Already there are reports of delays in shipments of critical raw materials and parts, especially for industrial use. And the ability of technology companies in Silicon Valley and elsewhere to deliver popular consumer goods such as TVs, cellphones and computers to their customers is likely to suffer hiccups.

The longer China has to resort to stringent measures, economists say, the more likely the U.S. and global economies will suffer significant damage. And it will take time before the full repercussions are known.

Yet few economists appear willing to entertain worst-case scenarios. Based on past episodes of viral outbreaks such as SARS in the early 2000s, they expect COVID-19 to peter out soon.

“Although it’s too early to assess the true impact from the coronavirus outbreak, a healthy U.S. economy looks likely to withstand any potential spill-over effects,” said economist Priscilla Thiagamoorthy of BMO Capital Markets.

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