The largest shock on the U.S. economy since 1947. We expect the contraction of activity to reach -30% q/q annualized in Q2 2020, representing two times the cumulated contraction of 2008-2009. We now expect two months of social distancing (March and April) instead of one month only, with a progressive albeit delayed recovery thereafter.

A U-shaped recovery remains our central scenario. The size and design of monetary supportive measures suggest that a recovery will begin from Q3 2020 onward and gain steam in Q4 2020, allowing a rebound of growth at +3.3% y/y in 2021. However, this rebound will have a cost in terms of the deficit, expected at 9.6% of GDP in 2020 and 8.5% of GDP in 2021. We still believe that a L-shaped scenario, representing a cumulated loss in terms of value-added of USD 5.5 trillion at a horizon of four years, instead of USD 1.9 trillion in our central case, has a lower probability.

The delinquency rate (loans more than 30 days past due) of U.S. companies on commercial and industrial loans is likely to reach a record high of 6.5% at the end of the year, the highest since 1992. However, the size and structure of the stimulus (equivalent to a vast system of credit guarantees) and the cash position of U.S. companies will allow a smaller progression of insolvencies compared with the subprime crisis (we expect a +25% rise of insolvencies in 2020 against +47% in 2008-09).

U.S. companies in the wholesale and retail sectors are the most at risk from the pause in sales as they had, on average, less than one month of turnover available in cash prior to the crisis. In manufacturing activities, the most exposed sectors are petroleum and coal industries (18 days of turnover available in cash), food (40 days), textiles (44 days) and the paper industry (46 days).