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RBC Economics Gauges Coronavirus Supply-Chain Risks
Written by The Content Team | Published on March 4, 2020
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Ripple effects of stalled productivity in China due to the coronavirus outbreak are being felt globally — including here in Canada — as fears over supply-chain disruptions grow.
However, while Canada's direct supply-chain exposure to China is significant, it's still limited, according to a recent report from RBC Economics.
"Of the regions worst-hit to-date by COVID-19, China is by far the most significant import source for Canada. Yet much of Canada's imports from China are finished goods (notably cellphones), which have limited impact on near-term domestic production," the report says. "Imports of intermediate inputs matter more for production, and about 10 per cent of total Canadian imports of intermediate products came from China at last count." Intermediate inputs are goods used in the production process to create finished products.
China is Canada's second-largest source of imported production inputs behind the U.S., which accounts for 50 per cent, RBC Economics says.
As for Canada's exposure to other countries feeling the effects of COVID-19, RBC Economics says South Korea, Italy and Japan together account for about 4 per cent of total intermediate product imports.
Still, the longer the outbreak lasts and the more countries it affects, the more impact intermediate-goods shortages could have on industrial output in Canada. "At this point we still see that possibility as more of a downside risk than a best base-case assumption," RBC Economics says.
Find the full RBC Economics report, titled Gauging Canadian Coronavirus Supply Chain Vulnerabilities, at rbc.com/economics.
For a roundup of coronavirus coverage, plus timely reminders and tools that can help when markets are volatile, click here.
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