JP Morgan slashes second-quarter GDP forecast to just 1%

Stock Market

A truck hauls a shipping container at Yusen Terminals (YTI) on Terminal Island at the Port of Los Angeles in Los Angeles, California

Mike Blake | Reuters

J.P. Morgan economists said they now see second-quarter growth of just 1%, down from their prior forecast of 2.25% and way off the 3.2% reported in the first quarter.

“The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. Coming on the heels of last week’s crummy April retail sales report, it suggests second quarter activity growth is sharply downshifting from the first quarter pace, ” the economists wrote.

The Atlanta Fed’s GDP Now tracker has GDP growth for the first quarter at 1.3% for the quarter.

The J.P. Morgan economists also changed their view on the Fed, and now do not expect the next move to be an interest rate hike.

“We had previously expected the next move from the Fed would be a hike, albeit at the very end of our forecast horizon in late 2020. We now see the risks of the next move as about evenly distributed between a hike and a cut. We still sense little appetite on the FOMC for an insurance ease to goose inflation, but we see rising odds of ‘your father’s rate cut’: one prompted by downside growth risks,” they wrote.

They said the key risks for U.S. growth include uncertainty from the trade war, impacting business sentiment, and global economic slowing.

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