Morgan Stanley slashes forecast for US economic growth through the end of the year as more stimulus appears 'unlikely'

J. Scott Applewhite/AP PhotoUS Capitol.
  • Morgan Stanley slashed its forecast for fourth quarter US GDP growth on Sunday to 3.5%. The firm’s previous estimate for the quarter was 9.3%.
  • A team of economists said they do not expect a second stimulus package to be released by the end of this year.
  • Morgan Stanley’s former 9.3% fourth-quarter growth prediction was one of the highest among major banks, according to data compiled by Bloomberg.

Morgan Stanley slashed its forecast for US gross domestic product growth in the fourth quarter to 3.5% from 9.3%, citing “diminishing fiscal support” in a Sunday note.

A team of Morgan Stanley economists said that a second stimulus package is “unlikely to be delivered this year.” They also noted that a divided government after the election means that more “fiscal gridlock” is to come, whereas a unified government may result in fiscal expansion.

Morgan Stanley’s former 9.3% fourth-quarter growth prediction was one of the highest among major banks, according to data compiled by Bloomberg. The firm’s forecast cut is just one of the latest in a recent string of slashed growth expectations on Wall Street. Goldman Sachs halved its growth forecast to 3% last week, JPMorgan cut its expectation to 2.5% from 3.5% shortly after, and Bank of America dropped its forecast earlier in September to 3% from 5%.


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Morgan Stanley’s 2020 GDP forecast is now -2.7%, from -1.5%. However, the firm said it believes there has been enough recovery progress that the US economy will return to pre-pandemic levels of real GDP by the middle of 2021.

The economists added that their policy strategists see a potential path to stimulus this year if there is a “clear weakening of markets” or economic data that pushes Congress to reach an agreement.

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