The nation’s top economists forecast that the economy will experience a 6% contraction in 2020, with conditions beginning to recover sometime around the third quarter after a sharp second-quarter decline, according to the American Bankers Association’s Economic Advisory Committee. While the general consensus among the committee—which is made up of 16 chief economists from some of the largest U.S. banks—was that economic activity would expand in the third quarter, there was wide variation among members on the overall economic effect of the coronavirus pandemic.
For example, four committee members projected an economic contraction of under 5% for the year, while an equal number believed it would exceed 8%. Committee members were also divided on when economic output would return to pre-pandemic levels, with most predicting such a recovery would occur in 2022.
“This is an incredibly uncertain and unprecedented time,” said EAC Chairman Catherine Mann, managing director and global chief economist at Citi. “It remains to be seen whether and when consumer behavior and business activity will return to the normal levels we used to know, while many believe there will be substantial changes in the post-pandemic world.”
The committee forecast a national unemployment rate of 10% by year-end, and forecasts for unemployment in 2020 ranged from 4% to 13%. Consumer spending—which is currently experiencing a deep contraction—is expected to rebound in the later half of the year for an overall annual decline of 7.3%. Mann added that business activity would likely trail consumer behavior as state and local economies begin to slowly reopen.
Mann also discussed the committee’s median forecasts for GDP, consumer spending, unemployment, interest rates, as well as factors feeding into them, on a bonus episode of the ABA Banking Journal Podcast sponsored by ProfitStars, a division of Jack Henry and Associates.