US: Economy to contract more than 5% over the next two quarters – Wells Fargo

Analysts at Wells Fargo, look for the US economy to contract more than 5% over the next two quarters. They project that nonfarm payrolls will decline by roughly eight million jobs over the next two quarters.

Key Quotes: 

“The rapidly evolving COVID-19 outbreak and the steps that authorities around the world have taken to combat it have caused us to rethink the forecast that we released only last week. We now look for the U.S. economy to contract more than 5% (not annualized) over the next two quarters, making it the deepest peak-to-trough decline in real GDP in the post-World War II era. However, the Federal Reserve has recently undertaken a number of measures to keep credit flowing to businesses and households, and it appears that Congress will soon approve meaningful fiscal measures that should cushion some of the blow to the economy. Assuming that the virus does not come roaring back again this autumn, then the economy should begin to recover later this year.”

“We now forecast that global GDP will tumble more than 2% in 2020, the deepest global downturn in at least 40 years. Under the assumption that the pandemic does not return to the northern hemisphere later this year, we look for growth in most economies to turn positive again by the end of 2020. Still the 2.7% growth rate that we forecast for global GDP in 2021 would still be markedly below the 3.5% per annum growth rate that the global economy has averaged over the past 40 years.”