Goldman sees unprecedented stop in economic activity, with 2nd quarter GDP contracting 24%

  
Via:  vic-eldred  •  one week ago  •  43 comments

By:   Patti Domm

Goldman sees unprecedented stop in economic activity, with 2nd quarter GDP contracting 24%

S E E D E D   C O N T E N T


Goldman Sachs economists on Friday forecast an unprecedented 24% decline in second quarter gross domestic product, following a 6% decline in the first quarter, based on the economy’s sudden and historic shutdown as the country responds to the coronavirus pandemic.

The economists then expect a bounce back of 12% in the third quarter and 10% in the fourth quarter, but unemployment will surge to 9%. They also expect GDP to contract by 3.8% for the full year on an annual average basis, and 3.1% on a fourth quarter over fourth quarter basis. 


Just five days ago, Goldman economists had expected the economy to trough with a decline of 5% in the second quarter after a flat first quarter. They had expected a resurgence in the second half and full year growth of 0.4%.

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“Over the last few days social distancing measures have shut down normal life in much of the U.S. News reports point to a sudden surge in layoffs and a collapse in spending, both historic in size and speed, as well as shutdowns of many schools, stores, offices, manufacturing plants and construction sites,” the economists said. “These developments argue for a much sharper drop in GDP in Q1 and Q2.”

In the past week, schools, public buildings, restaurants and stores across the country have shut down.

The state of California issued a stay at home order for its 40 million residents, and on Friday morning,   New York state said it was mandating 100% of the workforce to stay home , excluding essential services. 

President Donald Trump has told Americans to stay away from bars and restaurants, and a number of states have ordered those businesses to close, resulting in the layoff of millions of workers.






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Vic Eldred
1  seeder  Vic Eldred    one week ago

And to think it all could have been easily avoided but for the government of China!

A recession is inevitable!

 
 
 
The People's Fish
1.1  The People's Fish  replied to  Vic Eldred @1    one week ago

China needs to pay for reparations to the world for their disaster. They will pay eventually as we are going to incentivize the return of the manufacturing that pulled them out of the 3rd world toilet bowl.

They did it to themselves.

 
 
 
Vic Eldred
1.1.1  seeder  Vic Eldred  replied to  The People's Fish @1.1    one week ago

We owe China money. I think every penny we owe should be deducted from whatever congress authorizes to be spent on the effort to eradicate it here in the US.

 
 
 
XDm9mm
1.1.2  XDm9mm  replied to  Vic Eldred @1.1.1    one week ago

We owe China money. I think every penny we owe should be deducted from whatever congress authorizes to be spent on the effort to eradicate it here in the US.

Easy way to accomplish that.  Simply default on the specific bonds that the Peoples Republic of China owns.   They did after all often buy all of specific Treasury offerings.

But that can only be accomplished when we FINALLY repatriate every company and tools FROM that Communist shithole.   If any corporate CEO balks, then cut that company off at the knees and stop ALL dealings with it and inform other countries that their support for the company woill be viewed as supporting COMMUNIST CHINA and dealt with appropriately.

Reagan was successful in bringing the Soviet Union to it's knees.  We need to get behind Trump and help ensure Communist China is brought to it's knees.  NOW rather than later.

 
 
 
Freedom Warrior
1.1.3  Freedom Warrior  replied to  XDm9mm @1.1.2    one week ago

I like where you are going with that approach.

 
 
 
XDm9mm
1.1.4  XDm9mm  replied to  Freedom Warrior @1.1.3    one week ago
I like where you are going with that approach.

The BIG issue is we MUST reduce our dependency on China.   Leave them with silk ties and sneakers.   Repatriate anything and everything else.  Failing that, build competitors here that can eviscerate their companies with superior products.

 
 
 
Freedom Warrior
1.2  Freedom Warrior  replied to  Vic Eldred @1    one week ago

I'd say we are in a deep depression right now.  Our small business alone has layed off over 100 employees.  We are closing locations, petitioning lenders for relief.  Tenants are doing the same to us.  The velocity of money has ground to a halt.  Students and millions of others in limbo. Rent and mortgages going unpaid. Lending?  On what basis. No bars, minimal restaurant activity via take out. Capital improvements cancelled.  Virtually no travel or vacation spending. Service sector in lockdown. No Sex workers and probably little hookup sex unless you've been tested then quarantined. No concerts. 

I could go on and on but that is depression by any measure.

 
 
 
XDm9mm
1.2.1  XDm9mm  replied to  Freedom Warrior @1.2    one week ago
No bars, minimal restaurant activity via take out.

Move to Texas.  Yesterday, the Governor said restaurants could deliver drinks with the meals!!  What could be better than having a plate of Tacos and a jug of Margaritas being delivered that you can enjoy in your tidy whiteys while watching the tube?

 
 
 
Vic Eldred
1.2.2  seeder  Vic Eldred  replied to  Freedom Warrior @1.2    one week ago

Double digit unemployment?  I can see it too. All served on a platter courtesy of the People's Republic of China!

 
 
 
Freedom Warrior
1.2.3  Freedom Warrior  replied to  XDm9mm @1.2.1    one week ago

Well I do have family there.  However, for now the wife is still employed and I am working on dealing with the company lenders and such.

Plus we did stock up on Sauza Hornitos from Costco.

 
 
 
Citizen Kane-473667
2  Citizen Kane-473667    one week ago

We can't do this.  Most of the country lives paycheck to paycheck. Are we going to stop banks from sending out credit card bills and mortgage notes? Are car loan payments going to be halted? Insurance payments? Light bills? Gas bills? All of our other bills so we can afford to buy two months of groceries and sit on our asses at home?

Most people can't even afford two weeks of groceries with their last paycheck and god knows that Unemployment Insurance won't cover everything--if they even qualify for it!

 
 
 
Vic Eldred
2.1  seeder  Vic Eldred  replied to  Citizen Kane-473667 @2    one week ago

We are about to spend over a $Trillion dollars to prevent all of that:

https://finance.yahoo.com/news/australia-curbs-travel-u-cases-224522374.html

 
 
 
XDm9mm
2.1.1  XDm9mm  replied to  Vic Eldred @2.1    one week ago
We are about to spend over a $Trillion dollars to prevent all of that:

They're talking about a number north of two trillion now.

 
 
 
Citizen Kane-473667
2.1.2  Citizen Kane-473667  replied to  Vic Eldred @2.1    one week ago

Going to take more than that to pay the bills of all of those put out of work.

 
 
 
Citizen Kane-473667
2.1.3  Citizen Kane-473667  replied to  XDm9mm @2.1.1    one week ago

That might cover some people for a couple of months, but not all. Seriously, I pay out over $4k a month just in bills easy. The extra money they were talking about and the income from UI wouldn't pay them all, much less put food on the table for 4 people and gas in our car so we can still go grocery shopping or to the doctor if we get sick or injured.

 
 
 
Vic Eldred
2.1.4  seeder  Vic Eldred  replied to  XDm9mm @2.1.1    one week ago

Yup, they are all in on this. Huge spending packages are favored by both parties now. The cure may very well be worse than the sickness!

 
 
 
XDm9mm
2.1.5  XDm9mm  replied to  Citizen Kane-473667 @2.1.2    one week ago
Going to take more than that to pay the bills of all of those put out of work.

Once the immediate panic over the virus and very possible very near term anti-virals being proved effective, those people will go back to work.  And I'll further submit that will generate another economic boom never before seen.  People will start buying and stocking for the NEXT pandemic situation which will translate into even more jobs than were previously lost.

 
 
 
XDm9mm
2.1.6  XDm9mm  replied to  Citizen Kane-473667 @2.1.3    one week ago
That might cover some people for a couple of months, but not all. Seriously, I pay out over $4k a month just in bills easy.

I'll submit that the near term issues won't be for more than a month or two.  There's exceptional promise with a cocktail of existing meds which have been proved in a France study to effectively eliminate the virus from people.  Fortunately, Trump is gung-ho for using it, even though Fauci is still stuck in his 'FDA clinical trials with thousands of participants to "study" the efficacy'.  Sorry Doc, but these be new times calling for new ideas!!

Also, I obviously don't know about your personal situation, but every, and I mean EVERY bank or vendor I deal with has contacted me (email of course) noting that they will be waiving late fees and even payments for any affected by this situation.  Hell, even the pest control service company I use emailed me and said they will continue servicing their customers and will if necessary create long term payment plans if the customer is unable to pay.

As was very famously said:

"The only thing to fear is fear itself."   And this situation is very applicable to that sentiment.  

 
 
 
Freedom Warrior
2.1.7  Freedom Warrior  replied to  XDm9mm @2.1.6    one week ago

I want to swing that direction. Contemplating the alternatives is grotesque.

I asked my son would he take this real world gamble.

You could invest $100K and if the economy survives you would be able to collect $40K for years or you cold lose all of it if the company files bankruptcy.  Is it worth the risk.

In your scenario I would probably take that risk.  But right now it feels differently.  In hindsight someday I will know the answer.

 
 
 
Greg Jones
2.1.8  Greg Jones  replied to  XDm9mm @2.1.5    one week ago

I have a agree with you. Once the "curve" has flattened and trending downward and it looks like all the preventive measures like social distancing  have been factored in and infections are decreasing, I believe the rebound will progress quickly. So much of this has been produced by an "abundance of caution" overreaction to this viral threat because of the glut of worse case scenarios put out by the usual culprits.

 
 
 
Citizen Kane-473667
2.1.9  Citizen Kane-473667  replied to  Greg Jones @2.1.8    one week ago
social distancing

This is the core of what is killing the jobs right now. We will have to find a way to eliminate that requirement either through vaccination or elimination of the at-risk segment of the population co-mingling with the low risk segment.  Locally we have stores that are setting aside times of operation strictly for the elderly and infirm to shop to lessen their risk of exposure.

 
 
 
Freedom Warrior
2.1.10  Freedom Warrior  replied to  Greg Jones @2.1.8    one week ago

I'm on board with the though process but as part of one of the business sectors hit most severely I am getting a sense that certain behavioral patterns are going to altered in a way that will impact us long term.  A pivot point if you will if only one that was massively accelerated by this economic shock.  

I only have a vague notion of how that may play out right now since there so many impacts swirling around me. I'll do my part to restore normalcy.  We'll need plenty more.

 
 
 
XDm9mm
2.1.11  XDm9mm  replied to  Freedom Warrior @2.1.7    one week ago
I want to swing that direction. Contemplating the alternatives is grotesque.

I'll be the first to admit that it takes that old "intestinal fortitude" to be positive.  But, I'll also note that having been on this space orb we call planet earth for 70 years, I've learned that America will always pull through.

I actually feel confident that the medical cocktail of drugs that was tested with fantastic results in France will very soon be in wide spread use (from what I understand it actually is already in use but not reported as it's use is is not 'officially sanctioned') and will stop this bug in it's tracks.  As long as the cocktail isn't abused and the bug develops resistance or mutates, we'll be fine.

The majority of people, and the media continually forget that the typical annual flu kills more in this country alone than this virus has thus far globally.  Granted, it's still essentially early in the bugs history, but considering we're also nearing the usual end of the 'flu season', I honestly believe this will disipate nearly as quickly as it emerged.

 
 
 
Freedom Warrior
2.1.12  Freedom Warrior  replied to  XDm9mm @2.1.11    one week ago

I tell myself and my family much the same then simultaneously kick myself for not panicking, thinking I could be invested in stocks yielding double or triple the income from before once we all recover.  If I only knew what Burr knew when he knew it.

 
 
 
XDm9mm
2.1.13  XDm9mm  replied to  Freedom Warrior @2.1.10    one week ago
I'm on board with the though process but as part of one of the business sectors hit most severely I am getting a sense that certain behavioral patterns are going to altered in a way that will impact us long term.  A pivot point if you will if only one that was massively accelerated by this economic shock.  

I believe the vast majority of people will recognize that the 'economic shock' was actually caused by as Greg notes, and "over abundance of caution" (albeit a likely legitimate over abundance) and did not have anything to do with the underlying strength of the economy.

I only have a vague notion of how that may play out right now since there so many impacts swirling around me. I'll do my part to restore normalcy.  We'll need plenty more.

I believe part of the impact it will have is people will realize how vulnerable they are to disruptions in their financial stream and endeavor to actually create that 'rainy day fund' to tide them over when times demand it.

Others, with the means, will reach out and help where necessary and if possible.   Fortunately, in my personal situation, the vast majority of my tenants will never have a problem with rent.  They're military.  There are others who I've already reached out to and let them know I'll work with them once things calm down.  That in and of itself calmed them down immensely and immediately.   Hell, if necessary, I'll make a Costco run and bring them some canned goods.

And I know I'm not alone.  Others will do what I'm doing and more. 

 
 
 
XDm9mm
2.1.14  XDm9mm  replied to  Freedom Warrior @2.1.12    one week ago
I tell myself and my family much the same then simultaneously kick myself for not panicking, thinking I could be invested in stocks yielding double or triple the income from before once we all recover.  If I only knew what Burr knew when he knew it.

I've FINALLY convinced my son and daughter-in-law to not panic and leave their funds where they are (they're both fed employees in Thailand) even though they've had the shyte kicked out of the value (small cap funds) since they will come back.  Moving it to other 'stable' funds now, will only lock in the paper loss they've taken.  

On a side note, I believe it would be a good bet to get back into the market actively starting in April.  I'm giving a good look to the airlines (pent up business and leisure demand) and big box retailers, and take a look at any and all companies that supply medical devices and 'survival supplies'.   

 
 
 
Freedom Warrior
2.1.15  Freedom Warrior  replied to  XDm9mm @2.1.14    one week ago

All good thoughts.  We're pinning our hopes on a surge in leisure travel demand by at least the summer. I know I already possess that pent up demand for travel you mentioned.  Unfortunately, our ski season has ended which is my annual (favorite) trek to Lake Tahoe and we had to close our hotel in Carmel so no near term option there. I'm desperate to get away to some peaceful environment.

Speaking of the market I should probably doing my research right now in preparation for some reinvestment moves for that cash on the sidelines.

 
 
 
Snuffy
2.1.16  Snuffy  replied to  XDm9mm @2.1.13    one week ago
I believe part of the impact it will have is people will realize how vulnerable they are to disruptions in their financial stream and endeavor to actually create that 'rainy day fund' to tide them over when times demand it.

I really hope so but let's be honest.  While most individuals are smart people are dumb and will usually find ways to shoot themselves in the foot.

 
 
 
XDm9mm
2.1.17  XDm9mm  replied to  Snuffy @2.1.16    one week ago
I really hope so but let's be honest.  While most individuals are smart people are dumb and will usually find ways to shoot themselves in the foot.

Yeah I know.  People are their own worst enemy.  They can't see more than a millimeter in front of their nose.

 
 
 
Nerm_L
3  Nerm_L    one week ago

Ummm ...  I think that sharp decline in GDP is going to be global.  Goldman Sachs is only stating the obvious.

It seems the financial wizards are experiencing depression.  The economy is working according to Maynard Keynes rather than according to Milton Friedman.  The supply-side monetarists have been dead wrong and now we pay for their hubris.

This isn't a recession.  And we won't know if this will become a recession (or depression) until the pandemic recedes.  You know, Goldman Sachs and the rest of the supply-side monetarists are in the business of managing risk.  How are they doing?  Their monetary theories collapsed in less than four weeks.  I don't believe taking advice from those who have proven themselves to be so very incompetent would be wise at this moment.

Right now, we can't afford the luxury of listening to incompetents like Goldman Sachs.  

 
 
 
Vic Eldred
3.1  seeder  Vic Eldred  replied to  Nerm_L @3    one week ago
The economy is working according to Maynard Keynes rather than according to Milton Friedman. 

Keynesian economics is more a government option for the bad times. The economics of Milton Friedman is what produces the good times. What is happening to the economy (a prosperous one only a month ago) is because of a government ordered shutdown - not due to any form of economic policy.


This isn't a recession.  

Not at the moment, but we are well on the way. As I say, it is inevitable at this point.

 
 
 
Nerm_L
3.1.1  Nerm_L  replied to  Vic Eldred @3.1    one week ago
Keynesian economics is more a government option for the bad times. The economics of Milton Friedman is what produces the good times. What is happening to the economy (a prosperous one only a month ago) is because of a government ordered shutdown - not due to any form of economic policy.

Well, it seems obvious that the monetarists are hoping for run away inflation caused by shortages.  The central banks are already preparing to become artesian wells of cash to drive more money chasing short supplies.  The monetary actions being taken now is devaluing the cash realized from the market sell off.

The DOW has lost $10 trillion in value.  How much actual cash was realized from the sell off?  I wouldn't be surprised if much less than $1 trillion was actually extracted from that record high market.  Dimes for dollars is how monetary policy works.

Monetarists fear the value of money.  That's why monetary policy employs such strenuous efforts to devalue money.  But monetary policy falls apart when confronted with the water/diamond paradox of the real economy.  Under current conditions cash is king.  And that means Keynes is king, too.

 
 
 
Vic Eldred
3.1.2  seeder  Vic Eldred  replied to  Nerm_L @3.1.1    one week ago

If John Maynard Keynes were alive today he'd be stunned by it all.

 
 
 
Nerm_L
3.1.3  Nerm_L  replied to  Vic Eldred @3.1.2    one week ago
If John Maynard Keynes were alive today he'd be stunned by it all.

No doubt.  I really don't know how Keynes would react but I wouldn't be surprised if he would be appalled by how much the real economy has deteriorated.

 
 
 
Freedom Warrior
4  Freedom Warrior    one week ago

What's worse.  Millions dead or 100's of millions in human misery for a decade or more?

 
 
 
Vic Eldred
4.1  seeder  Vic Eldred  replied to  Freedom Warrior @4    one week ago

Are those our only options?

 
 
 
Freedom Warrior
4.1.1  Freedom Warrior  replied to  Vic Eldred @4.1    one week ago

No but just trying to get a sense of what price people are willing to pay.

It may not come to it but I would have to be realistic.  Would I indirectly sacrifice my life in order for my family to survive the financial crisis.  Something to think about.

 
 
 
Vic Eldred
4.1.2  seeder  Vic Eldred  replied to  Freedom Warrior @4.1.1    one week ago
Would I indirectly sacrifice my life in order for my family to survive the financial crisis. 

One is directly tied to the other. No state ordered shut down, no economic crisis. The same goes for that proposed bailout which was unthinkable only a few decades ago.

I'll give you this much - At least this time the money is going to working people rather than to bailout car manufacturers and investment banks.

The downside - We all knew the car manufacturers and investment banks would eventually be able to pay the government back - it won't be that way with workers.

 
 
 
Citizen Kane-473667
4.1.3  Citizen Kane-473667  replied to  Vic Eldred @4.1.2    one week ago
it won't be that way with workers

For most, it will be deducted from their tax returns...just like the Bush stimulus. It was basically a interest free government loan. For those that don't cover it with their tax returns, then it will become a tax debt that DOES accrue interest and penalties.

 
 
 
Vic Eldred
4.1.4  seeder  Vic Eldred  replied to  Citizen Kane-473667 @4.1.3    one week ago

You see that in the pending legislation?

 
 
 
Citizen Kane-473667
4.1.5  Citizen Kane-473667  replied to  Vic Eldred @4.1.4    one week ago
You see that in the pending legislation?

Nope, basing it strictly on the last round.

 
 
 
Vic Eldred
4.1.6  seeder  Vic Eldred  replied to  Citizen Kane-473667 @4.1.5    one week ago

We shall find out in about a week's time.

 
 
 
Tacos!
5  Tacos!    one week ago

Oh big surprise! I don't think we need economic experts to tell us it's going to be an insane year for the economy and the numbers that measure it.

 
 
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