Wall Street Agrees the World Is in Recession, Disagrees on Depth
- BofA, Goldman and Bank of America run different 2020 forecasts
- Quarterly U.S. and China performances likely worst in 50 years
Wall Street economists are united in declaring that the coronavirus has forced the world economy into a recession, but they are divided over its depth.
In what Ethan Harris, chief economist at Bank of America Corp., calls “forecast leap frogging,” strategists have been forced to repeatedly cut their predictions for global growth as the virus spread from China to Europe and the U.S.
Now those at the big U.S. banks are unanimous that the first worldwide recession since 2009’s 0.8% contraction is underway. “The day the earth stood still,” is how economists at JPMorgan Chase & Co. are putting it.
Most see the worst for China in the first quarter and the rest of the world in the subsequent three months. JPMorgan Chase pencil in an eye-popping 40% plunge in Chinese gross domestic product in the first quarter from the previous three months, while predicting a 14% drop in the U.S. in the second quarter. Both would the biggest contractions in at least 50 years.
Such sudden deterioration is enough to shove the world into recession, which because of typically fast-growing emerging markets most economists say is growth below 2.5%.
But uncertainty toward the virus’s effect means there is doubt over 2020 as a whole. The JPMorgan economists project a 1.1% slump over the year, while those at Citigroup Inc. expect growth of 1.4%.
Here’s a rundown of what the big banks are saying in reports this week with their predictions for the world and biggest economies in brackets: