GOLDMAN PREDICTS UNPRECEDENTED DECLINE IN ECONOMIC ACTIVITIES WITH Q2, 2020 EXPECTED TO CONTRACT 24%
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ver the last few months, the war against Covid-19 through health directives such as social distancing has shut down the normal life in the US. Reports indicate a sudden surge in layoffs and a decline in consumer expenditure, both in size and speed that has never been witnessed before. Operations such as stores, schools, manufacturing plants, and construction sites have also been shut down, leaving the economy running on ‘essential services’ alone. These developments led to a sharp drop in GDP in the 1st quarter as economists warn of a sharper drop in the 2nd quarter.
According to Goldman Sachs Inc. economists, the Covid-19 pandemic will inflict greater economic suffering than they had previously anticipated. Earlier, the economists predicted that the economy would have a 5% decline in Q2 after a flat Q1. On March 20, the economists forecasted an unprecedented 24% decline in Q2 GDP. This was following a 6% decline in Q1 as the country was slowly preparing to respond to the impacts of Covid-19. However, they expect a 12% and 10% bounce back in Q3 and Q4, respectively, with a 16
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9% surge in unemployment. Based on an annual average basis, they predicted that the GDP would contract by 3.8% for 2020. Elsewhere, other financial institutions seem to have a different forecast for the April to June period. The Bank of America has nearly the same figure, with Goldman Sachs at a 25% decline in the GDP of Q2. On the other hand, JPMorgan Chase & Co. have their Q2 predictions at a 14% decline. On another account, the President of Federal Reserve Bank of St. Louis, James Bullard in a THE POWER IS NOW MAGAZINE | JULY 2020
