by Calculated Risk on 3/13/2020 11:28:00 AM
Friday, March 13, 2020
From Merrill: Flirting with Recession
A few excerpts from Merrill Lynch research:
The economy will flirt with recession in the coming months with negative GDP in 2Q, we believe. Growth is expected to remain soft in 3Q with recovery starting thereafter.Note that that data was for February. March will be much worse.
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We now expect the Fed to cut 100bp at the March FOMC meeting, bringing rates to zero.
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Based on BAC aggregated card data, we estimate that retail sales ex-autos contracted by 0.2% month-over-month (mom) seasonally adjusted in February. At first glance, it seems pretty good, all things considered. However, remember that the retail sales aggregate is not a comprehensive measure of consumer spending as it excludes most services with the exception of restaurants. Importantly, it does not include travel-related services which have declined meaningfully over February. On a monthly and seasonally adjusted basis, airline spending tumbled 11.2% mom, lodging down 9.1% mom and cruises down 18.6% mom in February.
emphasis added
Goldman Sachs also expects the Fed to cut rates to zero:
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.