Goldman sees unprecedented stop in economic activity, with 2nd quarter GDP contracting 24%

Stock Market

“Theater Closed” signs are posted in front of the AMC Montebello, as the US chain of AMC movie theaters closes for 6 to 12 weeks, On March 17, 2020 in Montebello, California, as the coronavirus (covid-19) epidemic leads to restaurant and school closures and workers working from home in an effort to encourage social distancing.

Frederic J. Brown | AFP | Getty Images

Goldman Sachs economists on Friday forecast an unprecedented 24% decline in second quarter gross domestic product, following a 6% decline in the first quarter, based on the economy’s sudden and historic shutdown as the country responds to the coronavirus pandemic.

The economists then expect a bounce back of 12% in the third quarter and 10% in the fourth quarter, but unemployment will surge to 9%. They also expect GDP to contract by 3.8% for the full year 

Just five days ago, Goldman economists had expected the economy to trough with a decline of 5% in the second quarter after a flat first quarter. They had expected a resurgence in the second half and full year growth of 0.4%.

“Over the last few days social distancing measures have shut down normal life in much of the U.S. News reports point to a sudden surge in layoffs and a collapse in spending, both historic in size and speed, as well as shutdowns of many schools, stores, offices, manufacturing plants and construction sites,” the economists said. “These developments argue for a much sharper drop in GDP in Q1 and Q2.”

In the past week, schools, public buildings, restaurants and stores across the country have shut down.

The state of California issued a stay at home order for its 40 million residents, and on Friday morning, New York state said it was mandating 100% of the workforce to stay home, excluding essential services. 

President Donald Trump has told Americans to stay away from bars and restaurants, and a number of states have ordered those businesses to close, resulting in the layoff of millions of workers.

Products You May Like

Articles You May Like

Trump’s Foreign Policy Breakthrough Gives ITEQ A Tailwind
Government mortgage bailout numbers improve slowly, but the real test is ahead
Stocks making the biggest moves midday: Netflix, Tesla, Nikola, Lennar and more
Battle heats up over California split-roll property tax ballot measure
Stocks making the biggest moves midday: U.S. Steel, Tesla, Unity Software, Beyond Meat & more