U.S. Macro Outlook Amid COVID-19 - Q1 2020 Preview

by Matt Mullen | Mar 24, 2020

Before COVID-19, growth was poised to slow a bit in 2020, especially from slower business investment, and some positive factors were materializing in late 2019. In mid March, CBRE EA lowered its expectations for U.S. GDP growth to 0.4% for 2020, down from a previously estimated 2.0%. Specifically, we expect the economy will contract in H1 2020 followed by a bounce back in Q3. This deteriorating backdrop in the near-term has sparked a flight-to-safety among investors, forcing the Federal Reserve (Fed) to take aggressive action.

The labor market will come under significant strain in coming weeks and months as many workers, especially non-salaried service employees, forfeit hours and wages.

COVID-19 will impact various industries differently. The hospitality sector will likely bear the brunt from the epidemic. Major urban travel markets, such as San Francisco and New York, will suffer from a reduced inflow of high-spending international tourists. Cancelled trips and conferences will translate into a permanent loss in revenue. Conversely, production sectors should see more of a bounce-back as supply chains must be restored. Also, the housing market could potentially see a boost from the material drop in mortgage rates.

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