Goldman sees the main propulsion coming from
fiscal and monetary support greater than expected. Congress has recently passed a $2 trillion rescue package aimed at a variety of targets, and Goldman expects another measure on the way specifically aimed at supporting state governments. The Federal Reserve also has taken its benchmark interest rate to near zero and has rolled out a number of other
programs aimed at supporting the economy.
In addition, measures taken to contain the coronavirus spread, specifically through social distancing and increased testing, will “result in sharply lower new infections over the next month, and our baseline is that slower virus spread and adaptation by businesses and individuals should set the stage for a gradual recovery in output starting in May/June,” Goldman wrote.
However, that won’t happen without sharp contractions in manufacturing, particularly autos as well as consumer spending, that will be offset by food and beverage production and medical equipment.
“We expect manufacturing to recover somewhat more rapidly than services, as factories are likely to reopen more quickly than non-essential services firms,” Goldman wrote.
The firm’s estimates come amid a plethora of downbeat forecasts of how bad things could get in the near term and the uncertainty of how sharp the recovery will be.