Mar 19 2020

Deutsche Bank: in the first half of the year there will be serious global crisis | JP Morgan predicts that US GDP may fall by 14% in the 2nd quarter

New note from Deutsche Bank leaves no doubt: in the first half of the year, expect “a major global economic downturn”.In the first quarter collapse in aggregate demand in China in the II-m — in the Euro area and the United States.

“We now have preliminary data on the negative economic impact on China, and they far exceed our initial forecasts. Among other factors this should include more widespread, draconian measures of containment designed to cope with the spread of the virus, escalating tensions in the credit markets and a sharp tightening of financial conditions. All this forced us to revise substantially our global growth forecasts in the first half of the year,” the note says economic group at Deutsche Bank.

In China, a team of Deutsche Bank predicts economic decline by 9% on a quarterly basis, or 30% in the first quarter.

Also, Deutsche Bank predicts a fall in Eurozone GDP in the second quarter of 24% in the year, US GDP by 13%.

This is an unprecedented level drops. The previous record sharp quarterly decline in the US reached 10% in the first quarter of 1958.

The good news: forecasts are constructed in relation to short recessions. “We don’t expect a full return on investment, even taking into account the impressive scale of the fiscal and monetary stimulus, which likely will be used,” said the team at Deutsche Bank.

Of course, things can deteriorate. The forecast of Deutsche Bank depends on the idea that “adopted stringent measures of deterrence will smooth out the curve of the epidemic by mid-year,” and there will be a V-shaped recovery.

“It is possible and a much worse result,” they say.

In early trading the Dow Jones index fell 5%, and last month he lost 30%. The US dollar meanwhile rose by around 1%. Source

The US economy could shrink by 14% next quarter, according to the chief economist of the Bank JP Morgan Michael Feroli, is one of the worst calls for the United States – the epidemic of coronavirus.The fall will be more dramatic than in the fourth quarter of 2008 – the worst period of the great recession – when the economy contracted by 8.4%.

This suggests that the Federal reserve will continue to look for creative ways to support the economy and that the administration trump and Congress will allocate $1 trillion for budgetary support.

Other analysts also predict a downturn in the United States and around the world, as authorities restricted movement and public outlets in an attempt to protect public health. In the United States, the ripple effects of closing restaurants, shops and companies jeopardize millions of jobs.

“The United States, Europe and Japan moving into recession,” said IHS specialist Markit on Wednesday, predicting growth of world real GDP by only 0.7% this year and the US economy will contract by 0.2%.

According to JP Morgan, the US economy to shrink by 1.5% during the whole year, and unemployment is currently at 50-year low of 3.5%, will rise to 6.25% by mid-year, before weakening to around 5.25 percent by the end of the year, when growth resumes. Source

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