Morgan Stanley lowers their growth forecast for the US economy
- Q1 growth forecast at -3.4% (previously -2.4%)
- Q2 growth forecast at -38% (previously -30%)
You can check out their initial reasoning and forecasts here.
But once again, I'd like to point out that there is going to be heavy debate on how these figures are derived and what they mean at the end of the day.
A decline of 38% and Goldman Sachs' 34% may seem staggering but the interpretation comes down to whether or not these numbers are being seasonally adjusted or annualised.
The thing about the GDP figures that we are about to see is that it makes little sense to expect a recurring sudden drop in economic activity in each and every quarter by annualising the quarter-on-quarter estimate.
In essence, you can't really expect the economy to suffer the same sudden shock repeatedly for the next few quarters by compounding the actual drop in economic activity to be an annualised reading i.e. expecting an equal virus shock every quarter.
Granted, we don't have much clarity on how long this will go on and how much worse it can get but for now these "record-shattering" figures are no more than to make headlines really.
