BREAKING NEWS...Per J P Morgan, US is heading to recession in 1999.......GOLD seems a safe haven....
J.P. Morgan forecasts U.S. recession in 1999
NEW YORK, Oct 7 (Reuters) - J.P. Morgan & Co. (NYSE:JPM - news), the
fourth-largest U.S. commercial bank, has revised its forecast for the U.S. economy to
include a recession in 1999.
Morgan said in its quarterly forecast of world financial markets that it expected U.S. real Gross Domestic Product (GDP)
growth to drop to zero by the first quarter of 1999 and then shrink at a 2-percent annual rate in the second quarter and a
1-percent rate in the third quarter before picking up again in the fourth quarter to a 1.5-percent pace.
Economists define a recession as a contraction of GDP for two consecutive quarters.
Morgan is also calling for a federal funds rate target of 3.5 percent by the middle of next year. The Fed cut the key overnight
rate by a quarter point to 5.25 percent at last week's policy meeting.
J.P. Morgan economist Jim O'Sullivan wrote in the report, to be mailed to clients later this week, that the bank was lowering
growth expectations to negative from an earlier forecast that put 1999 GDP growth at 1 percent.
''The extra weakness has been triggered by the further deterioration in domestic financial markets in recent weeks. Although a
downturn could still be avoided, it would likely take a prompt reversal of recent financial market deterioration, or particularly
quick and aggressive support from policy easing. Neither are anticipated,'' Morgan said in the report.
Morgan is the first major U.S. financial house predicting a recession in the United States next year.
''Corporate profits are down, corporate bond spreads are wide, capacity utilization is down and bank lending is lower. All of
these do not bode well for business investment, which is likely to decline,'' O'Sullivan said in a brief phone interview.
Several U.S. banks and brokers have lowered their forecast of economic growth in the last two weeks. For instance, Merrill
Lynch & Co. (NYSE:MER - news), the largest U.S. brokerage firm, on Monday revised its outlook for GDP growth in 1999
to 1.6 percent from an earlier forecast of 2.1 percent.
''There are signs of an incipient credit crunch coupled with a worsening of corporate profits,'' said Gerald Cohen, senior
economist at Merrill. |
