Goldman Sachs sees zero US economic growth as the coronavirus spreads

Traders get the job done on the ground of the New York Stock Trade all through the opening bell on March 10, 2020 in New York.

Timothy A. Clary | AFP | Getty Visuals

Goldman Sachs on Sunday downgraded its outlook for the financial state in the initial two quarters of 2020 as the coronavirus zaps all progress from the U.S.

Jan Hatzius, Goldman’s chief economist, reduced his initial-quarter GDP growth forecast to zero from .7%. The economist also sees a 5% contraction in the 2nd quarter, followed by a sharp snapback for the remainder of the 12 months.

“We be expecting US economic activity to contract sharply in the remainder of March and through April as virus fears direct individuals and businesses to continue to minimize back again on spending these kinds of as travel, enjoyment, and restaurant meals,” Hatzius reported in a take note to clientele Sunday.

The coronavirus has infected more than 156,000 people today globally, like around 2,900 in the U.S. The swift distribute of the virus has sent stocks tumbling into a bear current market, with both the Dow Jones Industrial Typical and S&P 500 now buying and selling extra than 20% down below their file highs established just past month.

“Even with monetary and fiscal policy turning sharply even more toward stimulus … these shutdowns and soaring community stress about the virus are very likely to guide to a sharp deterioration in economic exercise in the relaxation of March and all over April,” Hatzius reported.

In addition to the consumer paying hit, Goldman also noted the increasing probability of “significant source chain disruptions” as the outbreak sends business enterprise exercise to a standstill.

Hatzius thinks that U.S. economic expansion ought to decide up in the second 50 % of 2020. He expects GDP development of 3% in the 3rd quarter and a 4% enlargement in the remaining a few months of the year. Factoring in his new estimates, for 2020 he sees the economic system escalating .4%, compared with a prior advancement estimate of 1.2%. 

Hatzius was, even so, fast to observe that these figures rely on a range of components, like governmental response. “The uncertainty all-around all of these numbers is significantly bigger than usual,” he stated. 

– CNBC’s Michael Bloom contributed reporting.

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