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U.S. Won't Avoid Painful Recession

Our latest GDP Model -- updated after the 4Q19 GDP growth rate was finalized at 2.1% -- calls for a 1.3% decline in GDP in 1Q20; an 8.4% decline in 2Q; a 5.5% decline in 3Q20; and a 0.5% decline in 4Q20. For the year, on average, GDP declines 3.9%, according to our estimate. To arrive at these rates, we first lowered projections on all segments of the $21.7 trillion economy, and then pulled out a select few for further cuts. These include the $541 billion Motor Vehicles and Parts segment; the $424 billion Recreational Goods and Vehicles segment; the $401 billion Clothing and Footwear segment; the $342 billion Gasoline and other Energy Goods segment; the $488 billion Transportation Services segment; and the $1.035 trillion Food Services and Accommodations segment. We estimate the sharpest declines in these categories will occur in the second quarter, with slow recoveries in the 3Q20, 4Q20 and 1Q21. We look for GDP to spike higher in 2Q21 and 3Q21, before settling back to more-normal growth at the end of 2021. Our estimates include the impact of the $2 trillion fiscal stimulus plan, but do not include any impact from potential additional stimulus. If we remove the impact of the stimulus, which we think will be spread over the next four quarters, our estimates change to -12% for 2Q20, -9% for 3Q20 and -3% for 4Q20. ...  billion Recreational Goods and Vehicles segment; the $401 billion Clothing and Footwear segment; the $342 billion Gasoline and other Energy Goods segment; the $488 billion Transportation Services segment; and the $1.035 trillion Food Services and Accommodations segment. We estimate the sharpest declines in these categories will occur in the second quarter, with slow recoveries in the 3Q20, 4Q20 and 1Q21. We look for GDP to spike higher in 2Q21 and 3Q21, before settling back to more-normal growth at the end of 2021. Our estimates include the impact of the $2 trillion fiscal stimulus plan, but do not include any impact from potential additional stimulus. If we remove the impact of the stimulus, which we think will be spread over the next four quarters, our estimates change to -12% for 2Q20, -9% for 3Q20 and -3% for 4Q20.   more

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