China's already battered economy, which is now reeling from the covid-19 outbreak, will likely stage a significant comeback in the second quarter but not after suffering significant damage.
This positive yet chilling forecast was made by Joseph Lupton, Global Economist at JPMorgan Chase & Co., who told CNBC Wednesday he expects China to recover from Covid-19 and grow 15% in the second quarter on a quarter-on-quarter, annualized basis. On the other hand, Lupton estimates a stunning negative 4% growth for China in the first quarter due to Covid-19 that stopped much of China's economic activity.
"It's not just looking at things still depressed. It's looking at where the bottom is and are we starting to march our way upward?" said Lupton. He believes 15% quarter-on-quarter annualized growth might be possible due to the depths of the first-quarter decline.
"If you get a rebound that's happening, even if you're still down 30%, if you were down 50%, that's a 20 percentage point move that actually starts to impact growth not just in the second quarter but even in the late first quarter," he pointed.
Lupton said he also sees more fiscal stimulus from the People's Bank of China (PBOC) that will help China recover more quickly.
Kevin Hasset, former chairman of the White House Council of Economic Advisers were even more pessimistic than Lupton about the negative effects of Covid-19 on China's economy. He forecast a huge negative 10% GDP growth for Q1.
He also fears that is China's markets head south, they might keep heading south and drag the economy along with it. Hasset said if Covid-19 lasts into the summer "we might be looking at a global recession."
Investors continued to flee equities for Treasuries Wednesday. The 10-year Treasury yield dropped to1.3% -- an all-time low -- after lingering at 1.36% earlier in the day. Analysts said the earlier uptick in yields somewhat eased concerns Covid-19 will plunge the globe into an economic recession.
The bond yield plunge was triggered by statements from the U.S. Centers for Disease Control and Prevention (CDC) Tuesday Covid-19 now has the potential to transform into a global pandemic with its increasing virulence in Italy, Iran, and South Korea.
Some analysts now surmise that if the Covid-19 outbreak does transform into a pandemic and extends into summer, the U.S. is looking at a recession. Right now, a market correction of anywhere from 10% to 15% might already be in the works as Wall Street continues to bleed.
