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JPMorgan economist: Coronavirus more likely to push US prices down than up

Julia La Roche
·2 min read

Wall Street is becoming more pessimistic about how the coronavirus outbreak will impact the global economy, but the one thing U.S. consumers are unlikely to experience is rising prices, according to JPMorgan Chase’s top economist.

The supply chain disruptions that have slowed or completely halted the shipment of some goods from are huge, and growing more severe as the virus spreads across the world.

However, JPMorgan’s Michael Feroli told Yahoo Finance that he doesn’t expect those bottlenecks to have a huge effect on domestic inflation — largely because of softer demand.

“I think you’re going to have moves in both supply and demand...and the supply chain disruptions will be inflationary, but I think what you are also seeing is aggregate demand is being held back by so far weaker tourism activity,” Feroli told “On the Move” on Monday.

However, “I think you could see that more generally in consumer spending of all sorts and any type of group activity,” Ferloli said

With energy prices way down and a stronger dollar, import prices will be held in check, the economist pointed out.

“When we kind of mix it all in there, we don’t see a big inflationary effect. If anything, we think this might be modestly disinflationary,” Feroli added.

The latest on the coronavirus, formally known as COVID-19.
The latest on the coronavirus, formally known as COVID-19.

In a February 28 note to clients, JPMorgan lowered its estimate for global gross domestic product (GDP) growth in the second quarter by 25 basis points to 1.5% from 1.75%. However, JPMorgan has yet to factor in the “community spreading” in the U.S., which would “prompt a larger downward revision.”

Feroli told Yahoo Finance that “it’s safe to say will have a pretty negative impact on consumer spending in the first and second quarter likely,” Feroli said.

The obvious areas that will be hit are travel and tourism, which account for over 5% of GDP. However, that doesn’t account for things sporting events, movie theaters, and group activities, which seem to be most vulnerable as major public events get shut down.

Feroli acknowledged that things are moving fast and it’s also challenging because there isn’t a great historical parallel.

Julia La Roche is a Correspondent at Yahoo Finance. Follow her on Twitter.

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