February 3, 2020 11:30 AM, EST

Factories Brace for Virus Blow Just as Demand Starts to Pick Up

(Balint Porneczi/Bloomberg News)(Balint Porneczi/Bloomberg News)

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The slow improvement in global manufacturing could be about to take a pause — or worse — as firms brace for supply-chain disruptions and a blow to demand from the spread of the coronavirus.

Factories across China are shut as authorities try to control the spread of the disease, while the nation’s trade partners have cut back imports from the world’s second-biggest economy in response to the scare. China is the world’s largest exporter of intermediate goods used by other companies in their products, meaning disruption there has ripple effects across the globe.

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“This isn’t necessarily a temporary slowdown,” said Timme Spakman, a trade economist at ING in Amsterdam. “The coronavirus could potentially impact the annual level of world trade in 2020, as it’s not certain that factories and logistics will be able to catch up and fully compensate for earlier delays, given the limited capacity.”

That’s putting a dent in hopes for a better 2020 after global trade fell in 2019 for the first time in a decade. The signing of a trade deal between the U.S. and China had lifted sentiment, though that has proved short-lived.

Amid a selloff in stocks on Monday, the People’s Bank of China stepped in with short-term funding to banks and cut the interest rate it charges for the money. China is reviewing whether it should soften its 2020 economic growth target, according to people familiar with the matter.

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