WASHINGTON, March 13 (Xinhua) -- Economists are predicting that the U.S. economy will contract in the second quarter amid mounting fears about the economic impact of the global spread of the COVID-19 outbreak.
Business and academic economists now expect, on average, U.S. gross domestic product (GDP) to contract at an annual rate of 0.1 percent in the second quarter, The Wall Street Journal reported on Thursday, citing a poll of 55 economists conducted from March 6 to March 10.
That is a large downgrade from forecasts in February, when those economists expected U.S. GDP growth of 1.9 percent from April to June, the poll showed.
The poll also found that 75 percent of economists expect the spread of the COVID-19 to be a "significant drag" on full-year economic growth in 2020.
Economists from at least six financial firms, including Wells Fargo and BMO Financial Group, also expect a U.S. economic contraction in the second quarter, ranging from an annualized rate of 0.1 percent to 2 percent, according to Bloomberg News.
Barry Bosworth, an economist at the Brookings Institution, told Xinhua that current expectations are for a short sharp drop in gross domestic product and employment in the second quarter.
"If the coronavirus follows the path of China and (South) Korea, we would expect a v-shaped pattern with recovery in the third quarter," he said.
Ryan Sweet, an economist with Moody's Analytics, said their new baseline forecast is for real U.S. GDP to rise 1.3 percent this year, compared with the 1.7 percent in the February baseline.
"Risks to the forecast remain weighted to the downside because of the coronavirus and the uncertainty surrounding the fiscal policy response," Sweet wrote Thursday in a report, noting it is possible that the path the economy heads down will be "darker" than their baseline.
"In our pandemic scenario, the U.S. economy contracts in all four quarters of 2020, with real GDP falling by approximately 1.5 percentage points peak to trough and the unemployment rate rising by 175 basis points," he said.
U.S. GDP increased at an annual rate of 2.1 percent in the fourth quarter last year, according to revised data from the Commerce Department released last month.
The Federal Reserve last week lowered the target range for the federal funds rate by 50 basis points to 1 to 1.25 percent, its first emergency rate cut since the 2008 financial crisis, as the COVID-19 outbreak has posed "evolving risks" to economic activity.
This is the Fed's ninth intra-meeting rate change since 1994, Sweet noted, adding the central bank could cut rates to the zero lower bound at its next policy meeting on March 17-18.
"Based on past experience, when the Fed adjusts interest rates intra-meeting, it usually follows up with another move at the next scheduled meeting," he said. "The Fed could signal that it is trying to get ahead of the expected weakness in the economy by slashing rates now."
Economists from Goldman Sachs and Bank of America Global Research also expected the Federal Open Market Committee (FOMC), the Fed's policy-making committee, to cut the federal funds rate by 100 basis points next week.
"In light of the continued growth in coronavirus cases in the U.S. and globally, the sharp further tightening in financial conditions, and rising risks to the economic outlook, we now expect the FOMC to cut the funds rate 100bp on March 18, a faster return to the crisis-era 0-0.25% rate than under our previous call for two 50bp steps in March and April," Goldman economists wrote Thursday.