BANK OF AMERICA: These 5 metrics will determine the length and severity of a coronavirus-fuelled recession

Andrew Kelly/ReutersA trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2020.
  • The coronavirus’ economic fallout is fuelling new fears of a global recession, and Bank of America laid out five metrics to monitor as the outbreak escalates.
  • US consumer strength is the “key to whether global recession” will last months or weeks, the bank’s analysts wrote Thursday.
  • Small business confidence, jobless claims, mortgage activity, and President Trump’s reelection odds could also signal the chances of an economic downturn.
  • Here are the five figures to keep an eye on as recession fears mount, according to Bank of America.
  • Visit the Business Insider homepage for more stories.

A coronavirus-driven recession could take several forms and consumer behaviour is the signal to watch, according to Bank of America analysts.

Friday’s open brought more market chaos as investors continued flooding defensive assets and cashing out of stocks. Coronavirus fears intensified as the outbreak’s infection count passed 100,000. Factory shutdowns throughout China kicked off a widespread supply shock, and demand faces a growing threat from fresh quarantine orders around the globe.

Economists are now bracing for recession and pinpointing specific stress points in the global economy. Most data releases haven’t yet captured the coronavirus’seffect on the US economy, and upcoming reports covering the late February and early March will bring crucial clarity around the outbreak’s fallout.

Here are the five metrics best suited to predict a recession and where they stand today, according to Bank of America.


Consumer strength

AP Photo/Gillian Flaccus

Current level: 130.7

The US consumer is “key to whether global recession” will be measured “in months not weeks,” the team led by Michael Hartnett, the bank’s chief investment strategist, wrote Thursday. Consumer spending accounts for two-thirds of US economic activity, and a sharp decline in US gross domestic product could spark global contraction.


Small business confidence

Andrew Lichtenstein/Corbis via Getty ImagesA automobile repair shop charges a customer on December 3, 2019 in the middle Village neighbourhood of Queens, New York.

Risk zone: below 100

Current level: 104.3

Bank of America pointed to the National Federation of Independent Business’ Small Business Optimism Index as the best figure to gauge confidence among business owners. The metric edged higher by 1.6 points to its current level in January and is sure to come under strong pressure as the coronavirus spreads across the US.


Jobless claims

Risk zone: above 250,000

Current level: 216,000

Jobless claims released Thursday showed a modest decrease from 219,000 in the week ended February 29, suggesting the coronavirus has not yet fuelled a labour strain in the US. The weekly release is among the most timely economic indicators and first warning signs of contraction.


Mortgage activity

Associated PressIn this Jan. 9, 2020, photo a ‘Coming Soon’ sign hangs from a real estate sign outside a home in Derry, N.H. On Thursday, Jan. 16, Freddie Mac reports on this week’s average U.S. mortgage rates. (AP Photo/Charles Krupa)

Risk zone: “Lower,” per Bank of America

Current level: 265.8

Single-family mortgage applications dipped in the seven-day period ended March 4 but are poised to increase as rates plunged to record lows on Thursday. Mortgage rates loosely follow US Treasury bills and, in turn, the Federal Reserve’s benchmark interest rate. The central bank’s emergency rate cut on Tuesday could fuel additional buying activity as rates stand at historic lows.


Odds of President Trump’s reelection

Olivier Douliery-Pool/Getty ImagesPresident Donald Trump speaks at the Republican National Committee winter meeting at the Trump International Hotel on February 1, 2018 in Washington, DC.

Risk zone: below 50%

Current level: 58%, according to Oddschecker.com

President Trump is still favoured to win reelection come November, but Vice President Joe Biden’s unexpected Super Tuesday victory drove a sharp uptick in his winning odds. An incumbent loss would throw new volatility into markets and eliminate Trump’s anti-regulation platform markets have grown accustomed to.


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