North American flu shouldn't greatly impact U.S. economy: analysts

by Bryan Salvage
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WASHINGTON — Although the U.S. economy was finally showing tentative early signs of a recovery, its newest potential threat is North American flu (which is also being called swine flu in many press accounts), according to The Associated Press. The U.S. tourism, food and transportation industries, in particular, could be further damaged by a wide-spread outbreak. An even bigger fear, however, is the recession could deepen in the U.S. and possibly worldwide thanks to this outbreak.

One more severe blow could reverse any progress made in easing the recession with the already fragile U.S. and global economy, sources said.

The fallout has already begun. The European Union is advising against nonessential travel to the United States and Mexico as a result of this latest outbreak. Although the U.S. economy could end up shrinking a bit more than now expected, most experts don't think a North American flu outbreak by itself would eliminate many U.S. jobs or severely worsen the economy.

Simon Johnson, former chief economist to the International Monetary Fund and a professor at the Massachusetts Institute of Technology's Sloan School of Management, envisions only a "small hit" to economic activity in the United States — just a few tenths of 1 percentage point.

But if the problem goes on for months, spreads broadly and leads to widespread flu cases, or even deaths, the damage in the U.S. could be more severe. It could delay an economic recovery well into 2010, predicted Mark Zandi, chief economist at Moody's Economy.com.

Sherry Cooper, chief economist at BMO Capital Markets & BMO Nesbitt Burns, said: "The last thing we need is additional reason to cut spending, eliminate travel and introduce trade restrictions."

The unemployment rate is now at a quarter-century high of 8.5%. Companies have laid off so many workers in the recession that they are already lean, analysts said.

Analysts expect only limited economic damage because the world is better prepared to deal with health crises today, given the experience of SARS (severe acute respiratory syndrome) in 2003 and then the threat of the bird flu, Mr. Johnson and other economists said. Vaccines can be rolled out fairly quickly. And many big companies now have contingency plans to keep essential operations going if employees can't make it to work.

"On the one hand, it's a terrible and traumatic thing — a flu pandemic," Mr. Johnson said. "On the other hand, it almost certainly will not have a significant effect."

It's a "little too early to determine the economic impact," said White House spokesman Robert Gibbs, but the Treasury Department and agencies are "monitoring the situation and looking into it."

Even though it's safe to eat pork as swine flu viruses don't spread through food, some analysts fear consumers could cut back from eating pork and shift to other meats like chicken or beef. "Though there is no evidence that swine flu can be obtained by eating pork, the fear generated by a disease named after hogs cannot be good for pork consumption," said Ken Goldman, JPMorgan analyst.

The World Organization for Animal Health in Paris said this virus has not been isolated in animals to date — therefore, it is not justified to name this disease swine influenza. "According to the World Organization for Animal Health (O.I.E.), North American Flu is a more accurate description of the virus that has affected people in North America," said J. Patrick Boyle, president of the American Meat Institute.

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