Baseline scenario is for continued — albeit moderating growth — at least according to the WSJ November survey. However, the reality of rapidly ascending Covid-19 caseload, hospitalization, and fatality rates may force a quick rethink. From The Hill today:
A sharp spike in COVID-19 cases across the U.S. is threatening the economic recovery and increasing the odds of a double-dip recession.
Economists across the political spectrum have consistently warned that sustained growth is dependent on getting the coronavirus under control, with many now viewing the rise in infections with heightened concern.
“Everything that is happening now, the risk of a resurgence in COVID-19 as well as policymakers walking away from stimulus negotiations — those two factors are what my team had feared would happen,” said [Beth Ann] Bovino [Chief economist of S&P Global].
“It wouldn’t be as large [a decline] as what we experienced in the first half of the year, but it would be a double dip,” Bovino said.
The WSJ November survey reported only one forecast W-like:
Figure 1: GDP as reported in 2020Q3 advance release (black), James Smith/Economic Forecaster LLC (red), Robert Dietz/National Assn of Home Builders (green), Amy Crew Cutts/A.C. Cutts & assoc. (pink), all in billions Ch.2012$, SAAR, on log scale. Source: BEA, 2020Q2 3rd release, October WSJ survey, and author’s calculations.
Conventional macroeconomic indicators lag too much to show an incipient slowdown. Forward looking indicators suggest a softening in consumer sentiment.
Figure 2: Nonfarm payroll employment, 000’s, s.a. (blue, on left log scale), University of Michigan Sentiment Index-Future (brown, right scale). November figure is preliminary. Source: BLS via FRED, U.Mich., and NBER.
In my view, the decline in sentiment is unsurprising given the catastrophic failure in pandemic management.
Figure 3: Baseline projection of 12 November 2020. Source: IHME, accessed 11/15/2020.
By the way, the “W” might not show up in quarterly GDP, but rather in monthly indicators…
Update, 11/16, 11:15am Pacific:
CDC ensemble indicates rising fatalities as well. Projections (weekly) below:
Source: CDC, accessed 11/16.
Update, 11/16, 3pm Pacific:
Source: DB Fed Watcher, November 16, 2020.