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The escalation of the pandemic, restrictions and Washington sleeping behind the wheel form the toxic environment that discourages U.S. economic recovery just as Joe Biden prepares to take the lead, and JPMorgan warns the economy is about to fall into territory negative.
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JPMorgan became the first Wall Street bank that, according to CNN, warned that GDP will turn negative early next year as Americans await vaccine distribution, Mediafax informs.
“This winter is going to be bleak,” JPMorgan economists wrote in a note to clients, “and we believe the economy will contract again” in the first quarter.
After successful growth this summer, the economy is rapidly losing momentum. The third quarter saw record growth of 33.1%, but now JPMorgan expects GDP to slow to 2.8% in the fourth quarter and then decline by 1% in the first three months of 2021.
Covid-19 infections have soared to record highs, forcing restrictions on return: New York public schools closed again this week, California and Ohio have issued nationwide quarantines, and even the national zoo is closing again. All of these steps will put pressure on the US economy.
The federal government cannot reach an agreement on the treatment of the economy. Republicans and Democrats have repeatedly failed to reach agreement on new fiscal support, creating a scenario where 12 million Americans could lose their benefits by the end of the year.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, criticized Congress for “a terrible neglect of its duties”.
The Department of the Treasury put the straw on the fire after removing $ 455 billion from the funds the Federal Reserve used for emergency lending programs. The Fed issued a statement against the move, marking a rare public dispute between the central bank and the Treasury Department – in the midst of a crisis.
Even the United States Chamber of Commerce, an organization normally pro-Republican, said Mnuchin’s decision “closes the door to liquidity options for companies at a time when they need it most,” adding that it “binds uselessly the hands of the future administration “.
JPMorgan expects the economy to grow “rapidly” in the second and third quarters, with annualized growth of 4.5% and 6.5% respectively.
Retail sales barely increased in October and, for the first time since April, spending on bars and restaurants declined. According to CNN Business, reservations at OpenTable restaurants peaked in mid-October and were down more than half from last year.
Target, one of the country’s largest retailers, had a blast in the third quarter but warned that the pandemic and the economy posed real risks going forward.
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