There is no question that the United States economy is taking a significant blow, as the coronavirus continues to spread.
Goldman Sachs economists have some forecasts. They say that GDP will most probably collapse at a 14% rate. It is a far cry from the 4,5 and even 6% scenario forecast by United States President Donald Trump about two years ago.
Allianz’s Mohamed EL-Erian said on Yahoo Finance’s on the Move that there is a global recession. He said that what sudden economic stops do is the global recession.
Economic contractions are happening often gradually (thus, not suddenly), giving business leaders and policymakers some time for adjusting so that growth might resume. However, the coronavirus pandemic has forced economic activity to grind to a halt. It is because social distancing has effectively shut down the services of the massive global discretionary industry. It also disrupted the massive global chain of manufactured goods.
El-Erian said that fragile states usually experience sudden stops. Or it hits community by a natural disaster, and it is when and where everything comes to a halt. He continued that those sudden stops never ran the country as systematically necessary as Europe, the United States, or China. Moreover, they have never been felt at the level of the global economy. So, we have an unprecedented case.
Economists struggle to model how bad things are getting because of the unprecedented scale and nature of what the world is facing.
James Sweeney is the Credit Suisse economist. He said that there is no blueprint for the current shock. The uncertainty about the size of the economic consequences and contagion is overwhelming.
The United States
Ian Shepherdson is the Pantheon Macroeconomics. Last Monday, he made a splash by taking a guess.
Shepherdson said that they now guesstimate that after a 2% fall in Q1, the second-quarter GDP will drop at a 10% annualized rate. In the second quarter, they are penciling in a 20% plunge in discretionary consumers. It is enough alone for subtracting some eight percentage points from the growth of GDP.
Moreover, there is the fact that the policy response (both fiscal and monetary) continues to be a work in progress. Thus, those facts are making the calculus involved in making such forecasts more difficult. So, the ultimate impact, timing, and form of the response remain impossible to know. Despite that, most of the people agree that the reaction will boost a surge in the activity once health officials tell us the coronavirus is under control.
For the second quarter, Shepherdson’s notes were followed by a slew of incredibly grim forecasts. Thus, economists had to use unconventional methods. The stimulus prospect encouraged those economists. All of them warned clients that those estimates are coming with a massive margin of error.
The Goldman Sachs economists headed by Jan Hatzius spoke on Friday. They said that over the last few days, social distancing measures, in much of the United States, have shut down a healthy life.
All in all, there is a tough situation in the United States and the whole world.
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