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Economists at Comerica Inc. now expect the U.S. economy to possibly dip negative for the second quarter as a fallout of the coronavirus pandemic.
In a note today to clients, Comerica economists wrote that they also expect a “significant” interest rate cut of a half-point when the Federal Reserve Open Market Committee meets next week. A “significant fiscal stimulus package” also is expected soon in Washington, D.C. to fend off the economic effects of the outbreak.
“We now expect to see a significant annualized rate of decline for second quarter U.S. GDP growth. Second quarter analysis is still very fluid, but a 2.0 percent annualized rate of decline, or worse, for Q2 is conceivable. A key question for the third quarter is the viability of the coronavirus during the summer,” according to the daily economic update from Comerica. “As of now, we expect the rate of new infection to slow through May. A step down from the recent exponential increases in cases will be a key demarcation in the evolution of the disease and the impact of the disease on the U.S. economy.”
At the University of Michigan, economist Gabe Erlich said the economic drop-off from the coronavirus illness “will depend on the course of the epidemic.”
“We expect the effects to be short-lived enough that we don’t meet the official definition for the economy to enter a recession, although it could end up being a close call. In particular, we expect growth to start bouncing back in the third quarter of the year,” Erlich said in a Q&A issued today by the University of Michigan. “We expect a sharp but short-lived contraction in economic activity if the disease evolves as aggressively as some of the scenarios we’re seeing.”
In a monthly report on West Michigan’s industrial economy, economist Brian Long wrote that it was too early to assess the outbreak’s economic impact, “except to say that it will definitely have a significant impact.”
“Although the flu and other viruses tend to spread more slowly in the summer months, it seems somewhat apparent that this virus will continue to torment us until we have an effective vaccine. Hence, with signs that the economy has already been slowing, the Coronavirus will obviously accelerate the pace of the decline,” Long wrote. “Will it weigh down the economy enough to drag us into a recession? We can no longer ignore the possibility. However, we can say with some degree of certainty that slower growth is inevitable for the next year or so.”
Long, the director of supply chain management research at Grand Valley State University’s Seidman College of Business, reported that the West Michigan industrial economy “flipped back to positive” in February with improvements in key activity indexes for sales, production, employment and purchases.