JPMorgan says Q1 GDP will decline because of Covid surge

Volunteers from the women’s organization Nuevo Amancer Mujer Integral help with the delivery of frozen turkey and food boxes ahead of thanks to families affected by the Kovid-19 epidemic in Los Angeles, California on November 18, 2020.

Frederick J. Brown | AFP | Getty Images

JPMorgan economists now see an economic contraction in the first quarter due to spreading coronovirus and related restrictions imposed by states and cities.

The new forecast is a departure from Wall Street’s widely held view that the first quarter will be positive, with the economy improving in 2021.

Economists at JP Morgan said they expected the economy to expand rapidly in the second and third quarters based on positive vaccine growth.

“In winter it will be severe, and we believe the economy will contract again in 1Q,” economists wrote.

He estimated that the first quarter would contract by 1% after a 2.8% increase in the fourth quarter. For the second quarter, they see a strong growth of 6.5% in the third quarter followed by an economy rally and growth of 4.5%.

Economists also expect about $ 1 trillion of fiscal stimulus, likely nearing the end of the first quarter. Which should help promote mid-growth.

“Economists have written that one thing that is unlikely to change between 2020 and 2021. is that the virus will dominate the economic outlook. Cases in the latest wave are easily surpassing the waves of March and July.”

He noted that the economy was helped through the July outbreak by economic revaluation. “There is no change in the economy now, instead it is now facing increasing restrictions on activity. Thanks to the new year, the holiday season – there is a risk of further increase in cases,” he said.

Economists expect to see monthly declines in employment at various points over the next few months, but monthly job gains should return to the millions in the middle of the year and then moderate again in late 2021.

“We think the trends in the labor market should roughly follow what we expect for consumer spending – job growth should be carefully weakened at the turn of the year as the virus weighs on the economy, and Then the decision to deliver the vaccine once at the beginning of next year should increase virus concerns and fiscal support, ”he wrote.

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