US GDP plunges 32.9 percent in second quarter amid coronavirus

US GDP plunges 32.9 percent in second quarter amid coronavirus

According to the Bureau of Economic Analysis, GDP "decreased at an annual rate of 32.9 percent in the second quarter of 2020". It fell into recession in February.

Economists had forecast a 35% GDP contraction, reflecting the months when many U.S. states were locked down to contain the spread of the coronavirus.

While activity picked up again in May and June as states started to reopen, it wasn't enough to undo the damage of the lockdowns. That has tempered hopes of a sharp rebound in growth in the third quarter.

The US economy suffered its worst blow since the Great Depression in the second quarter as the coronavirus crisis brought the country to a standstill, the feds said Thursday. Furthermore, high-frequency data indicate that 80 percent of America's small businesses are now open, up from a low in April of just 52 percent. Economists widely agree that without the historic fiscal package of almost $3 trillion, the economic contraction would have been deeper. A staggering 30.2 million Americans were receiving unemployment checks in the week ending July 11.

The GDP price index for domestic purchases meanwhile fell by 1.5% (Barclays: -0.5%), following a 1.4% rise during the first three months of the year. A similar pace of decline is anticipated in business investment. However, the scale and speed of the initial Federal fiscal response, including expanding unemployment insurance, economic recovery rebates and emergency loans enacted as a part of the CARES Act, caused post-transfer real disposable personal income to increase.

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The historic drop in output reflected the worst months of pandemic-related shutdowns to control the spread of COVID-19 and followed a 4.8% contraction in the first quarter that ended the longest expansion in U.S. history.

While that initially spurred hiring and sales, the rapid rebound proved to be short-lived as the pandemic soared to new heights and forced many businesses to retreat and local governments to impose new restrictions.

The figures lay bare the extent of the economic devastation that resulted from the government-ordered shutdowns and stay-at-home orders created to slow the spread of the novel coronavirus that abruptly brought a halt to the longest-running expansion.

"Export-oriented industry in particular must expect a strong headwind in view of the continuing high global infection dynamics", she said.

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