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SIFMA Survey: ’20 GDP -5.5%; ’21 +4.7%

A survey of 26 chief economists of global and regional financial institutions Tuesday by industry trade group, SIFMA, saw US fourth quarter to fourth quarter GDP falling 5.5% this year and rebounding strongly next year with a 4.7% gain.

The survey, taken through May 28, also found no expectation for the Federal Reserve to purposely employ negative interest rates as a policy tool.

The survey report said that the official unemployment rate may be depressed by misclassifications. “With these miscalculations and backlogs in registering unemployment claims in many states, the shadow unemployment number could be closer to 30%,” it said.

The survey did not follow the usual practice of comparing current expectations with those of the previous survey. “With broad agreement that the US is already in a recession, numbers have fallen off a cliff – or skyrocketed for metrics like the unemployment rate – and comparisons to prior forecasts have become irrelevant. The world has changed, and so must this survey,” SIFMA said.

The survey did not cover any ripple effects on the economy of the widespread protests of the past week in reaction to the death of a Minneapolis man at the hands of police.

Other findings of the survey:

– Economic Growth: 77% of economists expect a swoosh-shaped economic recovery, followed by 9% for both V-shaped and U-shaped recoveries.

– 43% of respondents expect nominal GDP to return to its pre COVID-19 level (in relation to 4Q19) by the end of 2022.

– 77% of economists expect the long-term potential GDP growth rate is between 1.5% and 2%, with 55% stating this has not changed from pre-COVID-19 estimates (ie, COVID-19 is not expected to have long-term effects).

– Interest Rates: Will the US follow other countries and regions into negative rate territory? 100% of respondents said no. Top factors impacting the Fed’s rate decision: labour impact of COVID-19, large scale return to work, and if there is a second wave of COVID-19, 86% of economists think rates will not begin to normalise until after 2021.

– Trade Policy – 45% said the focus will return to tariffs and trade negotiations by 2021; 40% said 2H20 if there is not a second wave of COVID-19.

– 50% of respondents expect no trade deal between the US and China, followed by 45% expecting a light deal (eliminating tariffs) and 5% expecting a full deal (IP protection).

– Will negative sentiments around China’s handling of COVID-19 impact future trade negotiations? 55% of economists responded ‘significantly’, followed by 40% ‘somewhat’. None believe that it ends all chances of negotiation.

Julie Ros

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