US Economic Outlook – a sharp turn into a recession
The US economy has entered the steepest recession on record going back to 1950. Any point estimates at this time carry a huge amount of uncertainty, but we expect economic activity to contract by around 25% annualized in 2Q20 (vs a prior record of a 10% drop in 1Q58), and foresee that real GDP will fall by 3.0% for the full year.
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The coronavirus has spread much faster and further than we previously expected, and has shut down large parts of the economy. Widespread shelter-in-place orders are prevalent across significant parts of the country, instituted in just the last few weeks. The lock-downs are necessary to bend the epidemiological curve, yet the scale of the resultant economic disruption greatly depends on the progress and duration of these measures.
- The US economy has entered the steepest sharpest recession on record going back to 1950.
- Uncertainty around the point forecasts and the longer-term implications is vast, but we now expect real GDP to contract by 3.0% for the full year.
- We forecast the maximum disruption to activity in 2Q20, followed by a gradual roll-back and return to growth in 3Q20.
- The jump in weekly initial unemployment claims for the week of March 20 was unprecedented, with 3.3 million claims filed, skyrocketing to a further 6.6 million for the following week.
- The overall data flow will get exponentially worse from here and potentially hard to decipher.
- Monetary policymakers have already employed a wide range of measures to stave off financial collapse.
- Record fiscal measures will not be able to offset the sudden stop, but are expected to support an eventual recovery.