WATCH: JP Morgan Chief Economist Predicts 14 Percent U.S. GDP Drop Next Quarter From Coronavirus
JP Morgan Chief Economist Bruce Kasman told CNBC’s Morgan Brennan that he expects to see a 14 percent drop in gross domestic product (GDP) in the second quarter due to the coronavirus pandemic.
Brennan interviewed Kasman on Thursday morning’s edition of CNBC’s Squawk on the Street, and asked him about his company’s recent analysis of the outbreak’s effect on GDP.
“Bruce, you just put out this note, and if I’m reading it correct here correctly, you’re expecting GDP in the US in the second quarter to drop 14%?” Brennan asked.
“Yeah, that’s correct,” Kasman said.
“Okay how do you get to that number?” Brennan asked.
With an odd laugh, Kasman said “You basically shut everything down in March and April, obviously it’s not just the U.S., it’s happening in Western Europe, it’s now increasingly happening across the world.”
“So we have this enormous disruption that is not limited just to spending on entertainment and travel, it’s spreading out to closing industries and it does enormous damage not just to GDP but to labor markets, I think we saw the first step of that in today’s jobless claim numbers,” Kasman added.
Kasman said that “I don’t think right now there is really any question that we’re going to have an intense hit there and it’s going to take second quarter growth down a lot, the real question is how long does this last, how do we recover from it.”
“Right now we still have a decent recovery in the second half of the year, which incorporates a stating of the virus drags and an opening up of activity, but still some important lingering damage in credit markets in industries that have been hurt,” Kasman said, concluding “The question right now is can we stand the damage being done in a way that those lingering effects are just limited.”
Kasman’s analysis is roughly in line with Deutsche Bank’s prediction of a 13 percent drop in GDP, and a significant escalation from the 3 percent drop JP Morgan was predicting just last week.
Watch the clip above via CNBC.
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