After already saying that the coronavirus outbreak will push the US into a recession, Goldman Sachs updated its estimates on Friday and now thinks the fallout could be even worse than it previously expected.
The firm on Friday dramatically cut its US economic forecast and is expecting gross domestic product will decline by 24% in the second quarter of 2020 due to the coronavirus pandemic. A drop of that size would be a record, nearly two-and-a-half times the largest drop of 10% 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," Goldman Sachs economist Jan Hatzius wrote in a Friday note.
Deutsche Bank predicts that the US economy will grow by just 0.6% in the first quarter before slipping into a 12.9% contraction.
The anticipated declines would "substantially exceed anything previously recorded going back to at least World War II," the bank wrote in a note Wednesday,
"We cannot stress enough the degree of uncertainty surrounding these projections," the economists wrote. "These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast."
JPMorgan economists expect that US GDP will shrink by 2% in the first quarter and 3% in the second amid the coronavirus outbreak. At the some time, eurozone GDP could contract by 1.8% and 3.3% over the same periods, the economists added.
"As we resign ourselves to the inevitability of a large and broad-based shock to global growth, the key issue is whether we can avoid a traditional and longer-lasting recession event," JPMorgan wrote in a March 12 note.
"We believe that the US economy has fallen into recession, joining the rest of the world, and it is a deep plunge," Bank of America economists led by Michelle Meyer wrote in a note Thursday.
The economists forecast that US gross domestic product will collapse in the second quarter, falling 12% on a seasonally adjusted annual rate basis — the biggest quarterly decline in post-war history — after growing only 0.5% in the first quarter of 2020. For the full year, the bank is forecasting a contraction of 0.8%.
"In the face of the most serious global health crisis in more than a century, fiscal and monetary policy makers around the world will have to pull out all the stops to prevent what currently looks like an inevitable recession from turning into a depression," Joachim Fels, the global economic adviser at Pacific Investment Management Co., wrote in a note to clients Monday.
That could send financial markets from "a drawdown to a meltdown," he added.
Morgan Stanley's new base-case scenario sees global GDP growth mildly contracting in the first half of the year before rebounding through the end of 2020, the firm wrote in a Tuesday note.
Global growth will hit 0.9% for the full year, making the downturn more pronounced than the recession in 2001 but less severe than the 2008 financial crisis, Morgan Stanley economists said.
UBS sees a "massive contraction" occurring in the US economy in the second quarter of 2020 and a deep recession in the first half of the year due to the coronavirus pandemic, according to a Thursday note.
The firm now thinks that US growth in the first quarter has dropped to -2.1%, and is forecasting an almost 10% contraction in the second quarter of the year.
"Our previous assumptions are invalid and even our downside scenario is becoming too rosy," UBS economist Seth Carpenter wrote. "For now, we assume that the worst of the virus passes in the US by late April, but restrictions continue until the end of May."
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