US GDP could shrink by 13% in 2nd quarter as part of 'severe global recession,' Deutsche Bank says

Published Wed, Mar 18 20208:09 AM EDTUpdated Wed, Mar 18 20209:20 AM EDT

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

(This story is for CNBC PRO subscribers only.) The U.S economy will contract by 13% on an annualized basis in the second quarter because of disruptions from the coronavirus outbreak, according to a new Deutsche Bank forecast on Wednesday. A drop that sharp would be "significantly beyond the range of modern historical experience," Deutsche said. That would be the biggest quarterly drop "going back to at least World War II," the firm said. Deutsche expects it will exceed the largest quarterly declines of the financial crisis of 2008 and the great recession of 1980 — each which saw about 8% quarterly drops to GDP at most. "We now see a severe global recession occurring in the first half of 2020, with aggregate demand plunging in China in Q1 and in [Europe] and US in Q2," Deutsche said. Deutsche sees the Euro area getting hit even harder, with the region;s second quarter GDP dropping 24%. Global quarterly GDP on the whole will crater 12% in the first quarter, "by far the worst quarterly decline in global growth," the firm predicts. The firm's forecast comes after Morgan Stanley told investors on Tuesday that a "global recession in 2020 is now our base case." Deutsche noted that the coronavirus pandemic has "spread further and more rapidly than was generally expected several weeks ago." "We now expect to see plunges in spending in these regions in March, April, and May, with recovery beginning to occur in May and June, depending on the region," Deutsche said. Deutsche's base forecast for GDP "assumes that the severe containment measures being taken will succeed in flattening the epidemic curves by midyear" in Europe and the U.S., with economic activity bouncing back in the third and fourth quarters. The firm added a caveat, noting the unpredictability of the current situation. "We cannot stress enough the degree of uncertainty surrounding these projections. These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast. The evolution of the virus is also highly uncertain," Deutsche said. – CNBC's Michael Bloom contributed to this report. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.

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Rebecca Cook | Reuters

(This story is for CNBC PRO subscribers only.)

The U.S economy will contract by 13% on an annualized basis in the second quarter because of disruptions from the coronavirus outbreak, according to a new Deutsche Bank forecast on Wednesday.