Economic analysts have sounded alarms that the ongoing global outbreak of the coronavirus could drag on growth, disrupt business activity and even drag the U.S. economy into a recession in the worst-case scenario. Investors are also bracing for volatility in the days ahead, with the outbreak beginning to more meaningfully weigh on economic data.
According to Goldman Sachs, the U.S. would register a relatively low growth in GDP of just 0.9% in the first quarter and no growth at all in the second quarter, representing the worst six-month window the economy has witnessed since the Great Recession.
While Goldman’s baseline scenario suggests the U.S. will narrowly avoid outright recession, analysts have noted that “the situation has proven worse than we expected” and that “the downside risks have clearly grown.”
“The pernicious global economic effects of the COVID-19 virus are battering the financial markets, sending stock prices into correction territory in record time and driving interest rates to record lows,” Bob Schwartz, senior economist at Oxford Economics, wrote in a research note on Friday, suggesting that the economy’s ability to withstand the “still-evolving corrosive shock from the virus remains to be seen.”
“The outcome will probably determine if the economy stays out of a recession this year,” he said.
Oxford Economics recently downgraded its global growth projections, sounding a warning about the impact of the virus, stating it “larger, broader and more long-lasting than we previously envisaged.”
Markets rebounded Monday, even as Chinese factory activity plunged in February to its lowest level on record, while the U.S. Treasury yields plunged to all-time lows.
“U.S. stocks are rising this morning on speculation central banks will intervene aggressively to offset the negative fallout from the coronavirus,” Scott Anderson, chief economist and executive vice president at Bank of the West Economics, wrote in a research note on Monday.
Despite the stock bounceback, analysts have downgraded their economic projections for the U.S. and global economies in recent days as the coronavirus outbreak continues to spread to new countries and threatens global supply chains. Almost 90,000 people across the world have been infected, with the virus killing over 3,000. Italy, South Korea, and Japan have seen infection totals mount in recent days. Within the U.S., new cases were confirmed over the weekend in Florida and New York, with two people already confirmed dead in Washington state from the disease.
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