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Illustration: Aïda Amer/Axios

In just a matter of weeks, top economists and investment bank analysts have gone from expecting the coronavirus outbreak to have minimal impact on the U.S. economy to warning that an outright recession may be on the horizon.

What's happening: The spread of confirmed coronavirus cases in Europe, the Middle East and the U.S., and the speed at which they are being discovered has set the table for the outbreak to have a larger and much costlier impact.

Between the lines: The outbreak threatens U.S. consumer-oriented businesses like restaurants, bars and travel, which have held up the economy as business investment has turned negative and the manufacturing sector has fallen into recession, largely as a result of the U.S.-China trade war.

What they're saying: Business investment, which declined through the last three quarters of 2019, could be further hit, Constance Hunter, chief economist at KPMG, tells Axios.

  • "If the virus spreads within the U.S. in any meaningful way, that is going to have a negative impact."
  • "That's a component we think could lead to a negative GDP print in the first and possibly the second quarter."

Europe and Japan are particularly at risk, as both have generated only 1% growth over the past year and are very susceptible to falling into recession.

  • “We could see a significant impact on Europe, which has been weak to start with, and it’s just conceivable that it could throw the United States into a recession,” former Federal Reserve Chair Janet Yellen said Wednesday at an event in Michigan.

Flashback: Just a few weeks ago, many economists thought the coronavirus would cause only a tenth of a percentage point decrease in U.S. growth this year.

  • But rosy projections were in short supply on Thursday as the Dow flirted with its largest single-day points drop in history.
  • The S&P 500 has fallen by 10% in just six trading sessions, the fastest correction in history from a record high, Deutsche Bank Securities chief economist Torsten Sløk said in a note to clients.

One level deeper: Goldman Sachs' chief U.S. equity strategist David Kostin warned Thursday that the firm now expects U.S. companies to "generate no earnings growth in 2020,” and that “a more severe pandemic could lead to a more prolonged disruption and a U.S. recession.”

  • Bank of America Securities cut its 2020 global growth forecast, and is now expecting the lowest reading since 2009.
  • Credit Suisse lowered its projection to 2.2% — below the 2.5% growth rate the IMF set as the threshold for global recession.

The big picture: Nearly half of U.S. companies in China said they expect revenue to decrease this year if business can’t return to normal by the end of April, according to a new survey by the American Chamber of Commerce in China, a group representing members from 900 companies throughout the country.

  • One fifth of respondents said 2020 revenue from China would decline more than 50% if the epidemic continues through Aug. 30.

Go deeper

The next stimulus takes center stage — just as it runs dry

Illustration: Sarah Grillo/Axios

Big Tech was buoyed by the exact thing that prevented the dreadful GDP report from being even worse in the second quarter: the pandemic stimulus measures.

Why it matters: The stimulus is in the spotlight as its key expanded unemployment benefits provision is set to lapse despite coronavirus cases surging across the country, reimposed lockdown measures and more businesses shuttering.

Jul 30, 2020 - Economy & Business

Facebook beats Wall Street estimates despite pandemic and boycott

Photo: Thomas Trutschel/Photothek via Getty Images

Facebook's stock was up more than 6% in after-hours trading on Thursday, after the tech giant reported strong revenue growth, despite a global ad slowdown due to the pandemic and a growing advertiser boycott.

Why it matters: Facebook's ability to beat top and bottom line revenue expectations amid the coronavirus crisis and the boycott speaks to the strength of the company's appeal to marketers despite serious challenges.

Ina Fried, author of Login
Jul 30, 2020 - Technology

Apple confirms short release delay for this year's iPhones

Photo: Alexi Rosenfeld/Getty Images

Apple's financial chief said Thursday that this year's new iPhone models will arrive a few weeks later than they have in years past, confirming earlier news reports and supplier comments.

Why it matters: The move means some revenue that typically comes at the end of September won't come until the final quarter of the year, but also reassures investors and customers that the delay won't be longer.