Economists expect the US to suffer its largest-ever contraction this quarter and the unemployment rate to soar to a post-Great Depression record, followed by a recovery that would be moderate and drawn out.
GDP is to plummet an annualized 25 percent from this month to June after a smaller setback in the first quarter, while the unemployment rate is to reach 12.6 percent, the highest since the 1940s, median forecasts in Bloomberg’s monthly survey of 69 economists showed.
That is dispiriting given a massive US government fiscal relief effort and Federal Reserve actions aimed at shoring up the financial system, as health experts urge social distancing to combat the spread of COVID-19.
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The downturn looks likely to be deemed as the first recession since 2007 to 2009 by business-cycle arbiter the US National Bureau of Economic Research.
The second half of the year is to see a resumption of growth, the survey showed, although a snap-back is unlikely.
The Fed is expected to keep interest rates near zero until the first half of 2022.
Photo: AP
“Even if the economy starts to reopen in mid-May, more than 20 million Americans will have lost their job, with the economy likely having contracted around 13 percent peak-to-trough, more than three times deeper than the global financial crisis,” ING Financial Markets chief international economist James Knightley wrote with his forecast submission.
“It will be a gradual reopening of the economy, so a return to ‘business as usual’ is many months away. Throw in crippling financial losses and a legacy of defaults and it means we estimate US economic output won’t return” to the peak late last year until mid-2022 at the earliest, Knightley said.
The Bloomberg survey was conducted from Friday last week until Thursday, when a report showed that another 6.6 million Americans applied for unemployment benefits, suggesting the unemployment rate is already approaching 15 percent.
A separate survey by the US National Association for Business Economics released yesterday showed similar projections for first-half GDP and average unemployment.
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