Goldman Sachs now says US GDP will shrink 24% next quarter amid the coronavirus pandemic - which wou

[Independent87548]

Goldman Sachs now says US GDP will shrink 24% next quarter amid the coronavirus pandemic - which would be 2.5 times bigger than any decline in history
Carmen Reinicke
Mar. 20, 2020, 01:21 PM

Flavio Lo Scalzo/Reuters

• Goldman Sachs on Friday dramatically cut its US economic forecast, saying it now expects GDP to decline by 24% in the second quarter of 2020 because of the coronavirus pandemic.
• A drop of that size would set a record - it would be nearly 2 1/2 times the 10% drop seen in 1958.
• "Early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway," the Goldman Sachs economist Jan Hatzius wrote in a Friday note.
• Read more on Business Insider.

After already saying the coronavirus outbreak will push the US into a recession, Goldman Sachs on Friday updated its estimates and now thinks the fallout could be even worse than it expected.

Goldman Sachs dramatically cut its US economic forecast and is now expecting gross domestic product to decline by 24% in the second quarter of 2020 because of the coronavirus pandemic. A drop of that size would be a record, nearly 2 1/2 times the 10% drop seen in 1958.

"The sudden stop in US economic activity in response to the virus is unprecedented, and the early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway," the Goldman Sachs economist Jan Hatzius wrote in a Friday note.

There are three main reasons Goldman slashed its GDP forecast. The first is that the firm expects spending in face-to-face service industries to take a more severe hit as consumers are increasingly encouraged to practice social distancing and stay at home.

Read more: Goldman Sachs pinpointed these 15 must-own stocks they say are best positioned to weather an inevitable coronavirus recession

Second, Goldman is forecasting a major contraction in manufacturing, with reduced domestic demand for non-food goods; reduced foreign demand for US goods exports; supply-chain disruptions; and plant closures.

The firm also said it foresees a slowdown in the US housing sector, from construction through real estate, similar to data in Asia.

Goldman said the hits would lower US GDP by as much as 10% in April. It now expects full-year growth in the US of -3.8% on an annual average basis.

Goldman Sachs

Read more: The coronavirus crash has pushed a group of quality companies to the cusp of disaster - and investors must now confront the 3 most dangerous letters in markets

The firm expects that after April that drag on the economy will gradually fade by about 10% per month.

"While the exact timing is highly uncertain and relapses are plausible, the assumption of a gradual recovery reflects the potential contributions from factors such as effective mitigation and testing actions, weather effects, medical breakthroughs or adaptation by firms and consumers," Hatzius said, adding that the slow pace of recovery even in 2021 would mean longer-lasting scarring for businesses and workers.

The downward revision in growth also sharply increased Goldman's unemployment-rate forecasts. The firm expects the unemployment rate to increase to 9% from 3.5% over the next couple of quarters.

Details of the White House's fiscal stimulus package could push the unemployment rate up or down, Goldman said.

 

[GHALIB]

Goldman Sachs now says US GDP will shrink 24% next quarter amid the coronavirus pandemic - which would be 2.5 times bigger than any decline in history
Carmen Reinicke
Mar. 20, 2020, 01:21 PM

Flavio Lo Scalzo/Reuters

• Goldman Sachs on Friday dramatically cut its US economic forecast, saying it now expects GDP to decline by 24% in the second quarter of 2020 because of the coronavirus pandemic.
• A drop of that size would set a record - it would be nearly 2 1/2 times the 10% drop seen in 1958.
• "Early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway," the Goldman Sachs economist Jan Hatzius wrote in a Friday note.
• Read more on Business Insider.

After already saying the coronavirus outbreak will push the US into a recession, Goldman Sachs on Friday updated its estimates and now thinks the fallout could be even worse than it expected.

Goldman Sachs dramatically cut its US economic forecast and is now expecting gross domestic product to decline by 24% in the second quarter of 2020 because of the coronavirus pandemic. A drop of that size would be a record, nearly 2 1/2 times the 10% drop seen in 1958.

"The sudden stop in US economic activity in response to the virus is unprecedented, and the early data points over the last week strengthen our confidence that a dramatic slowdown is indeed already underway," the Goldman Sachs economist Jan Hatzius wrote in a Friday note.

There are three main reasons Goldman slashed its GDP forecast. The first is that the firm expects spending in face-to-face service industries to take a more severe hit as consumers are increasingly encouraged to practice social distancing and stay at home.

Read more: Goldman Sachs pinpointed these 15 must-own stocks they say are best positioned to weather an inevitable coronavirus recession

Second, Goldman is forecasting a major contraction in manufacturing, with reduced domestic demand for non-food goods; reduced foreign demand for US goods exports; supply-chain disruptions; and plant closures.

The firm also said it foresees a slowdown in the US housing sector, from construction through real estate, similar to data in Asia.

Goldman said the hits would lower US GDP by as much as 10% in April. It now expects full-year growth in the US of -3.8% on an annual average basis.

Goldman Sachs

Read more: The coronavirus crash has pushed a group of quality companies to the cusp of disaster - and investors must now confront the 3 most dangerous letters in markets

The firm expects that after April that drag on the economy will gradually fade by about 10% per month.

"While the exact timing is highly uncertain and relapses are plausible, the assumption of a gradual recovery reflects the potential contributions from factors such as effective mitigation and testing actions, weather effects, medical breakthroughs or adaptation by firms and consumers," Hatzius said, adding that the slow pace of recovery even in 2021 would mean longer-lasting scarring for businesses and workers.

The downward revision in growth also sharply increased Goldman's unemployment-rate forecasts. The firm expects the unemployment rate to increase to 9% from 3.5% over the next couple of quarters.

Details of the White House's fiscal stimulus package could push the unemployment rate up or down, Goldman said.

very serious .

 

[Khanivore]

Damn, that's $5Trillion loss... that's equivalent to Japan's entire economy.

And the losses of other countries will be equally insane.

 

[obj 705A]

many people compare the pandemic to a WWIII with the virus, I too believe this is very similar to a world war, in WWII the majority of the world was destroyed.. all except the US, that is why the US emerged as the leader, WWII was a turning point for the US, something similar will happen now with this WWIII only this time China will be the country that comes out of this crisis with the least damage while the rest of the world (including the US) will be far much more damaged, there is a myth that China will lose industries to other countries due to the pandemic but the exact opposit is happening.. more & more factories outside China are closing while more & more factories in China are coming on line, more & more Chinese are going back to work while the economy of the rest of the world is grinding to a halt.
this pandemic has proven that China is the undisputed industrial king of the world.

 

[Jungibaaz]

Make no mistake, that level is unheard of. In many ways markets are already showing signs that in some ways this is a bigger drag on the economy than the financial crisis of 07-08.

But according to my intuition, recovery might be faster and better this time when we do eventually beat the virus. @Nilgiri

The other major risk for the developed countries is that they've got very little dry powder left. Central banks can't do much more in terms of extraordinary measures, and governments are already introducing fiscal stimulus.

 

[Nilgiri]

Make no mistake, that level is unheard of. In many ways markets are already showing signs that in some ways this is a bigger drag on the economy than the financial crisis of 07-08.

But according to my intuition, recovery might be faster and better this time when we do eventually beat the virus. @Nilgiri

The other major risk for the developed countries is that they've got very little dry powder left. Central banks can't do much more in terms of extraordinary measures, and governments are already introducing fiscal stimulus.

Yes the underlying (mid term) structure is overall fine, there will be a strong and fast rebound once more information + positive recovery from the corona-crisis is effected and (viable) solutions saturated and lockdowns etc ended...and capacities re-filled in key economic sectors.

07/08 was really caused by about 20 year (nasty mid term) structural gestation in the economy itself...that was pretty much covered up and attempted to be "inflated" away...and as we saw all it essentially needed was a big enough spark to kindle it.

Long term (past these mid term issues), there is a growing problem in the US and west in general with unfunded liability+public debt and the reliance on confidence/seignioriage that may simply not be there as compared to before (and you don't know till you go poking around and no one really wants to do that and be the fall guy for the short/mid term pain.... much less implement a stress test process for it).

Yet they keep scripting and setting fiscal policy very much like there is nothing wrong and kicking the can essentially. It would need multi-partisan institutional effort and thought pattern past the 4-5 year political terms....maybe corona-effects can shock the political and economic system enough to introspect there more. We will see.

 

[Crusher]

...................
The other major risk for the developed countries is that they've got very little dry powder left. Central banks can't do much more in terms of extraordinary measures, and governments are already introducing fiscal stimulus.

Which will result in gigantic budget deficits for this year. These so-called stimulus are just poor people's future taxes being directed for well being of mega corporations.

 

[Hakikat ve Hikmet]

Fear mongering!!! Coronavirus is the catalyst, and now the “usual suspects” are doing what they are paid for....

 

[OldTwilight]

And pompeo was asking trump to attack Iran in last week