Wall Street downgrades economic forecasts

JPMorgan says the economy will shrink by an annualized 1% next quarter, adding to a growing number of firms trimming estimates as the coronavirus rages.

Why it matters: It's the first major Wall Street bank that expects the economy will contract again as a result of the pandemic.

What they're saying: “This winter will be grim, and we believe the economy will contract again in 1Q,” JPMorgan economists wrote.

• The economy "now faces the headwind of increasing restrictions on activity. The holiday season — from Thanksgiving through New Year’s — threatens a further increase in cases," they said.
• JPMorgan says economic growth in the the second and third quarters of 2021 will be an annualized 4.5% and 6.5% respectively.
• This quarter, it expects the economy to grow 2.8% on an annulled basis.

The big picture: Others on Wall Street are ratcheting down estimates for economic growth, in the wake of the coronavirus wave and tightened restrictions.

Economists at Goldman Sachs downgraded forecasts for Q4 and Q1 2021 to an annualized 3.5% and 1.0%, respectively, from 4.5% and 3.5%. They cited the "rapid and broad-based resurgence of the coronavirus."

• But it upped growth estimates for later next year, saying "the larger drag in the winter should imply an even larger reaccelerating on the back of mass immunization."

Barclays says it expects economic growth to be flat in Q1 2021, vs. its previous expectation of 3% annualized growth, as restriction measures "weigh on service activity in the coming months."

• It still expects the economy will grow at a 5% annualized pace this quarter.