GDP shrank by record 32.9% in second quarter during coronavirus shutdowns

GDP shrank by record 32.9% in second quarter during coronavirus shutdowns

Data on Thursday showed that the USA economy contracted by 32.9% in the second quarter, the steepest pace since the Great Depression.

Wall Street futures are pointing to a lower open, as markets are waiting for US GDP data for the second quarter. The collapse of the economy has been stronger than most economists predicted, calculating a 9% drop. While employment, spending and production have improved since reopenings picked up in May and massive federal stimulus reached Americans, a recent surge in infections has tempered the pace of the recovery.

"Implicit in the dramatic second-quarter decline in GDP is the beginning of recovery, as a huge decline in monthly GDP in April is partially reversed by increases over May and June", Herzon said.

The country has cautiously reopened and the economy has started bouncing back but economists say it is far from the pre-pandemic level and won't break even until 2022 at the earliest.

"Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth can not gain any traction".

Adding to the economic gloom was a disappointing jobless claims report, also released Thursday, which showed that initial weekly unemployment filings rose for the second straight week after steadily falling from its March peak of nearly 7 million. For the week ending July 25, the number of Americans filing jobless claims was 1,434,000, an increase of 12,000 from the previous week, Labor Department figures show (pdf).

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"As horrific as the GDP number is, it's basically reporting something that we all already knew - that economic activity came to a screeching halt as the virus altered the contours of our lives".

Personal consumption, which accounts for about 70 percent of GDP, contracted 34.6 percent.

Germany also managed to avoid mass layoffs, with separate data on Thursday showing that unemployment was stable at 6.4 percent in July, the same rate as June.

United States stocks futures were down a bit less than one percent following the data. Spending by state and local governments, whose budgets have been decimated in the fight against coronavirus fell at a 5.6% rate.

The second-quarter contraction was broad-based, the GDP release showed.

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