This Week's State Of The Economy - What Is Ahead? - 28 February 2020

By: Taro Chellaram /Wells Fargo Economics & Financial Report/Feb 29, 2020

This Week's State Of The Economy - What Is Ahead? - 28 February 2020

U.S - A Tough Week

  • The COVID-19 coronavirus hammered financial markets this week and rapidly raised the perceived likelihood and magnitude of additional Fed accommodation.
  • The bond market now expects almost four Fed rate cuts by the end of the year, but one might rightly wonder how lower short-term rates would alleviate supply chain disruptions.
  • We believe the Fed will try to remain patient, and look for a “material” change in the outlook, but if and when the committee decides it needs to ease again, it most likely won’t be just once.

 

Global - Virus Spreads to Broader Global Economy

  • A surge in new cases of coronavirus in Italy and Korea led to further concerns over the impact of the outbreak on global growth, while seemingly ongoing disruptions to Chinese economic activity suggest even further downside to our current forecast for Q1 Chinese GDP growth of 5.1% year-over-year.
  • Elsewhere, Canada’s Q4 growth figures were soft as GDP barely grew during the quarter, although the details were more mixed. Perhaps the most important global economic data point of the week is still to come, with China’s official PMIs for February due later today, the first significant release from China that should capture the virus’ economic impact.



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