China’s economy is likely to contract sharply in the first quarter, as a result of the measures that have been taken to limit the spread of the new coronavirus. The apparent slowdown in new infections in the last few days should raise hopes that output will bounce back quickly, leaving no lasting economic damage. But a slower recovery that would have larger and more prolonged effects cannot be ruled out until activity has started to return to normal. The daily data that we are monitoring give no signal that this is happening yet.
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