Economic Flash

Vining Sparks Forecast Revision, April 2020

by Craig Dismuke, Dudley Carter

Coronavirus’s Toll on Economic Activity Growing

The coronavirus has wreaked more havoc on the U.S. economy than expected.  Initially, it appeared the virus would be able to be contained with less expansive containment measures.  Half of U.S. states have now issued some form of stay-home orders.  As such, there is now 61% of the population living under restricted conditions. Given that the virus continues to spread, it now appears widespread containment measures will be needed for several more weeks, and likely longer in some areas.  While we cannot predict the future path of the virus, the economic damage is clearly growing.

As we will discuss in our 2Q Economic Outlook Webinar next Tuesday (register here), we approach economic forecasting from three different angles: income, expenditure, and value-added by industry. Under normal circumstances, the expenditure approach is the most simple method and provides sufficient outputs. Expenditures today, however, are more difficult to anticipate for a number of reasons. Combining a scaled-down income approach, specifically looking at labor income, with a cursory value-added analysis, it now appears that the economy is likely to contract significantly in the first half of the year.  We have penciled in a 7% contraction in 1Q followed by a 14% contraction in 2Q.  We note that they are in pencil because there remains a high degree of uncertainty accompanying these numbers.  There is, however, little uncertainty that the economy is going to contract sharply.

The longer the disruption persists, the more sluggish the 2H rebound is likely to be.  Already, we anticipate a significant loss of overall output in 2020.  The various stimulus measures implemented are expected to cushion the impact and provide a tailwind to the rebound, but are unlikely to avert the damage.

Vining Sparks Economic Forecast Revision, April 2020

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
Copyright © 2021
This is a publication of Vining-Sparks IBG, L.P.
775 Ridge Lake Blvd., Memphis, TN 38120