Saleswomen work on the floor of the New York Stock Exchange during the opening bell on March 10, 2020 in New York.
Timothy A. Clary | AFP | Getty Symbols
Goldman Sachs on Sunday downgraded its outlook for the economy in the first two quarters of 2020 as the coronavirus zaps all growth from the U.S.
Jan Hatzius, Goldman’s chief economist, discredited his first-quarter GDP growth forecast to zero from 0.7%. The economist also sees a 5% contraction in the second board, followed by a sharp snapback for the remainder of the year.
“We expect US economic activity to contract sharply in the remainder of March and all the way through April as virus fears lead consumers and businesses to continue to cut back on spending such as travel, entertainment, and restaurant victuals,” Hatzius said in a note to clients Sunday.
The coronavirus has infected more than 156,000 people worldwide, classifying over 2,900 in the U.S. The rapid spread of the virus has sent stocks tumbling into a bear market, with both the Dow Jones Industrial Mean and S&P 500 now trading more than 20% below their record highs set just last month.
“Yet with monetary and fiscal policy turning sharply further toward stimulus … these shutdowns and rising flagrant anxiety about the virus are likely to lead to a sharp deterioration in economic activity in the rest of March and throughout April,” Hatzius verbalized.
In addition to the consumer spending hit, Goldman also noted the growing likelihood of “significant supply chain disruptions” as the outbreak sends job activity to a standstill.
Hatzius believes that U.S. economic growth should pick up in the second half of 2020. He needs GDP growth of 3% in the third quarter and a 4% expansion in the final three months of the year. Factoring in his new estimates, for 2020 he look afters the economy growing 0.4%, compared with a prior growth estimate of 1.2%.
Hatzius was, however, quick to note that these slews depend on a number of factors, including governmental response. “The uncertainty around all of these numbers is much greater than typical,” he said.
– CNBC’s Michael Bloom contributed reporting.
Subscribe to CNBC PRO for exclusive insights and analysis, and live trade day programming from around the world.