JPMorgan becomes first major bank to say first quarter GDP will decline because of coronavirus surge

Volunteers from women’s organization Nuevo Amanecer Mujer Integral help with the distribution of frozen turkeys and food boxes ahead of Thanksgiving to families affected by the Covid-19 pandemic on November 18, 2020 in Los Angeles, California.
Frederic J. Brown | AFP | Getty Images

JP Morgan economists now see an economic contraction in the first quarter due to the spreading coronavirus and related restrictions being imposed by states and cities.

The new forecast is a departure from Wall Street’s widely held view that the first quarter would be positive, with an improving economy throughout 2021.

The JP Morgan economists said they expect the economy to expand briskly in the second and third quarter, based on positive vaccine trials.

The economists expect the first quarter to contract by 1% after growth of 2.8% in the fourth quarter. For the second quarter of 2021, they see the economy rallying and growth of 4.5% followed by a robust 6.5% in the third quarter.

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