- Bank of America has issued a warning about the possible risk of contraction in the US economy in the second quarter of the year, along with a prediction of a possible recession.
- Recent data shows that US manufacturing activity has slowed, with March levels the lowest in nearly three years.
- Investors are being overly optimistic about rate cuts, according to Bank of America, and not pessimistic enough about the possibility of a recession.
The US economy continues to face challenges in recent months, prompting major financial institutions to issue warnings about its economic outlook. Bank of America has recently added its voice to this chorus, warning that there is potential contraction risk in the second quarter of the year, similar to the warning issued by JP Morgan CEO Jamie Dimon.
In a recent report, Bank of America noted that “investors are too optimistic about rate cuts and not pessimistic enough about the recession.” This suggests that the economy is expected to slow further in the second quarter, which could lead to a decline in GDP.
“This week, the data flow is consistent with our view that the US economy slowed steadily through 1Q 2023,” Bank of America said in a note to clients, as reported by Reuters. “As a result, the carryover to 2Q looks weak, and we see significant risks of a GDP contraction in 2Q.”
Data for April 3 shows US manufacturing activity slowed, with March data revealing the lowest levels in almost three years. This suggests that the economy is struggling to maintain its momentum, and swift action is needed to prevent a potential downturn.
The economic worries and warnings from Bank of America and JP Morgan are worrying signs for the US economy. While it is important to closely monitor developments in the economy, it is also important to remember that these are only predictions and there is still time to take preemptive action to avoid a potential downturn.
