We noted last week that the second quarter of 2020 will probably mark the bottom of US economic activity, but how far down will it be? Now that the data set in stone, analysts will take a few weeks to measure all the purchases and sales to determine how much business activity was depressed. The range by Wall Street analysts (i.e. the Blue-Chip consensus) suggests a 2Q GDP from -27% to -42%, with an extremely wide dispersion of forecasts.
Besides the business community, governmental organizations make independent forecasts as well. The Federal Reserve Bank of Atlanta’s current estimate for 2Q GDP is -35%.
Put bluntly, those numbers are terrible, but its important to recognize that the dip is temporary. Once you add in sharp recoveries in the 2nd half of the year, the annualized GDP numbers are materially better. They’ll likely be recessionary, to be sure, but less likely to be double-digit terrible. Goldman Sachs, for instance, estimates a 4.6% annual contraction in 2020. That’s bad, but its actually an improvement on their previous calls (citing better unemployment targets, COVID therapeutics).