JPM takes downs China Q1 GDP again: now to 1% and highlights possible -3.9% scenario
JPM: We revise China’s 2020 growth forecasts in response to the latest developments as described above. In the new baseline scenario, we assume: (1) contagion will peak in March (using the baseline contagion assumption as mentioned above), consumption quickly recovers in 2Q; (2) factories reopen on Feb 10th in most provinces, though further delayed in a few provinces (e.g. Hubei, Zhejiang, Guangdong, Jiangsu). The supply shock will be most significant in February. Recovery in production is gradual and slow in February (after February 10), and will pick up in March and fully recover in 2Q.
We also consider a more severe scenario, for which we assume: (1) contagion will peak in April (using the pessimistic contagion assumption), consumption rebound will be delayed to mid-2Q and 3Q; (2) factory reopening will be postponed by another week compared to the new baseline scenario, i.e. longer disruption in production, transportation and shipping.
Overall, the key message from our new baseline scenario is that there will be significant slowing in 1Q GDP growth, followed by a V-shaped rebound in 2Q.