Bank of America has added to the growing concerns over the state of the US economy, warning that it is at risk of shrinking in the second quarter. The bank’s announcement follows JP Morgan CEO Jamie Dimon’s recent comments about his own concerns regarding the US economic outlook.
However, Bank of America had previously identified certain activities that could potentially forecast a recession, stating in a recent report that “investors are too optimistic on rate cuts and not pessimistic enough on recession,” according to Business Insider. The warning comes amid ongoing uncertainty surrounding the impact of the COVID-19 pandemic on the global economy.
Bank of America warns of potential US economic contraction in Q2
The US economy has been a cause of concern for financial experts in recent months due to inflationary pressures and the declining international influence of the US dollar. The latest to add its voice to the mix is Bank of America, which has warned of a potential contraction in the economy in Q2, increasing the risk of a full-blown recession. This comes as JP Morgan CEO Jamie Dimon expressed similar concerns about the outlook for the US economy.
Reuters recently reported that Bank of America Global Research shared this warning of recession in a client note. The bank said in the note that this week’s data flow is consistent with their view that the US economy slowed down steadily over Q1 2023.
As a result, the hand-off to Q2 looks weak, and there are significant risks of a contraction in GDP in Q2. The bank also cited data from April 3, showing a slowdown in US manufacturing activity. The data observed in March had the lowest levels in nearly three years, coinciding with a sharp decline.
Bank of America’s warning is likely to deepen concerns about the strength of the US economy, which has been hit by the Covid-19 pandemic and the ongoing inflationary pressures.
The Federal Reserve has been trying to combat inflation by increasing interest rates, but there are fears that this could slow down economic growth even further. With the risk of a recession looming, experts are calling for more action to be taken to support the economy and prevent a further decline.
