WASHINGTON (AP) — The U.S. economy shrank at a 4.8% annual rate last quarter as the coronavirus pandemic shut down much of the country and began triggering a recession that will end the longest expansion on record.
Yet the drop in the January-March quarter will be only a precursor of a far grimmer report to come on the current April-June period, with business shutdowns and layoffs striking with devastating force. With much of the economy paralyzed, the Congressional Budget Office has estimated that economic activity will plunge this quarter at a 40% annual rate.
That would be, by a breathtaking margin, the bleakest quarter since such records were first compiled in 1947. It would be four times the size of the worst quarterly contraction on record set in 1958.
The Commerce Department estimated Wednesday that the gross domestic product, the total output of goods and services, posted a quarterly drop for the first time in six years. And it was the sharpest fall since the economy shrank at an 8.4% annual rate in the fourth quarter of 2008 in the depths of the Great Recession.
In just a few weeks, businesses across the country have shut down and laid off tens of millions of workers. Factories and stores are shuttered. Home sales are falling. Households are slashing spending. Consumer confidence is sinking.
The GDP report showed that the weakness was led by plummeting consumer spending, which accounts for 70% of economic activity. Consumer spending tumbled at an annual rate of 7.6% in the first quarter — its steepest decline since 1980.
Business investment was also weak: It sank 2.6%, with investment in equipment down a sharp 15.2%.
A rare bright spot in the report was trade, which added 1.3 percentage points to GDP activity in the quarter. Government spending was up 0.7% in the first quarter, a figure that will likely accelerate with all of the support Congress has approved for rescue packages.
And housing showed a 21% increase in the first quarter, boosted by lower mortgage rates. But home sales, like much of the economy, have taken a nosedive since the virus-related shutdowns began in mid-March.
As the economy slides into what looks like a severe recession, some economists are holding out hope that a recovery will arrive quickly and robustly once the health crisis has been solved — what some call a V-shaped recovery. Increasingly, though, analysts say they think the economy will struggle to regain its momentum even after the viral outbreak has subsided.
Many Americans, they suggest, could remain too fearful to travel, shop at stores or visit restaurants or movie theaters anywhere near as much as they used to. In addition, local and state officials may continue to limit, for health reasons, how many people may congregate in such places at any one time, thereby making it difficult for many businesses to survive. It’s why some economists say the damage from the downturn could persist far longer than some may assume.
There is also fear that the coronavirus could flare up again after the economy is re-opened, forcing reopened businesses to shut down again.
The Trump administration takes a rosier view. President Donald Trump told reporters this week that he expects a “big rise” in GDP in the third quarter, followed by an “incredible fourth quarter, and you’re going to have an incredible next year.”
The president is building his re-election campaign on the argument that he built a powerful economy over the past three years and can do so again after the health crisis has been resolved.
So much winning. I will say this. Trump’s prediction was accurate. I’m tired of all this winning.
Pretty amazing how governors can screw op the economy isn’t it.
I’m not sure what you mean. It was the Trump administration’s miserable response to COVID-19 that caused the absolute disaster we find ourselves in. Of course, he takes no responsibility for his ineptitude and lack of action.
I believe that any governor in Michigan has already screws the state economy. Just look at Detroit and the surrounding areas. It’s pretty much a “ghost” town compared how it was at the height of the Automobile. And it’s just not the governors. It’s also these politicians in the state that has had their share of “self-destruction”.
You can’t spend 9 trillion dollars( 40% of our GDP) and shutdown the Country at the same time .
Just how full of shit can you possibly get? President Trump was criticized for limiting travel from China “too early”. The deaths here would have been much greater had he not done so.
Fauci, Pelosi and other nay-sayers were encouraging normal activities and large gatherings up until March.
What would have minimized the effect of the virus is the prompt admission of the goddamned Communist Chinese government that they fucked up…and the WHO not sucking up to the Chicoms by defending their deceptions.
Screw the Chicoms!
Screw the WHO!
Screw the Democrats!
Screw YOU!
They will say anything to make Trump look bad. If he closed down the borders and air travel sooner, he would have been a racist dictator. If he waited any longer, he would have been an irresponsible leader who needs to be impeached. There is no pleasing these people. We should just start pretending that they don’t exist, because their opinions really don’t matter.
I love that you’re enjoying seeing people dying and losing their livelihood as some kind of statement against the current administration. You and Bill Maher, and the rest of the commie squads, got what you wished for, and you know what they say about wishes
…except in that they influence other useful idiots.
Bill Maher isn’t the only one - the entire Hollywood lefties - Robert Deniro and Jim Carrey want a recession, so they can say that Donald Trump was unable to not only curb the Coronavirus, but his economy has tanked because of it. And that Trump doesn’t know how to get his own economy back up after boasting about before the crisis.
Oh BS.
Trump limited air travel from China and was called a racist etc. The dems in the house began legislation to limit his ability to affect air travel.
Then magically he was slow to respond.
Of course the dems had him busy with their fake impeachment charges.
The sun is blocked by clouds it’s trumps fault. The sun sets, it’s trumps fault.
TDS is as real as Covid 19.
Been there did that. Did a stint at Pontiac motors in a past life.
The union destroyed the automobile industry in Michigan, I do have stories of the ineptitude of the Union.
Let’s take this at face value:
I am sure it will be very bad. The lockdown didn’t really help. No one could go out and buy anything. Of course, they had ample time a month ago. But since then, you couldn’t even sit down at a restaurant and have a decent meal - without someone telling you that you have to wear a mask. Even then, people couldn’t really order things online, because everything was backed up. Or going to be delayed for a few days, or even weeks. Which pretty much put everything else on hold. Prices at the pump are an all-time low (and continuing) and it’s really hurting everyone - not helping.
Overall, the stock markets tanked to its lowest levels - down 7,000 points (in March). So, no one is really buying. And for good reasons.
Then we have the WHO-China connection. That sure will make things a lot brighter…Not! 
I think before it’s all over…we could be facing 3.5% in the second quarter. That could be “one of the worst years” for the markets - since World War II.
Honestly I’m surprised it wasn’t somewhere between 5-6%, it certainly could have been.
The only thing that will keep the 2nd quarter numbers being the worse since 1928 is the rapid response to the virus and it’s economic impact. We’ll probably hit a total loss of GDP between 20-30% before it’s over but it actually could have been far worse.
Fortunately both the US and Europe are starting back to work so by the end of Q3 we should be back in positive territory or very near it.
That isn’t really completely accurate. The Stock market is a reflection of future confidence, a leading indicator or what’s to come rather than a lagging indicator of what has already happened.
Watch Oil buys, when you see a 20% Increase in buying by the major industrial powers big things, positive things are starting to happen.
China made it’s largest buy in decades in March in prep for their restart so put your focus mainly on Europe. Unless china drops back off below November numbers they are moving forward.
Baseless, unsupportable partisan horse shit.
If you want to have this argument I’ll eat you for fucking lunch so you’d better come big, hard, early and in an Ironman suit and even if you do you’ll leave you limping and whimpering like a bitch on three broken legs.
It’s called “trolling” or “flame baiting”. He hasn’t got a fucking leg to stand on.
Yet another troll with no facts just rhetoric.
I think your assessment here is spot on but the rally in the market yesterday seemed to ignore a lot of the bad financial news across the markets. Let’s hope that trend keeps up. America has a lot of valuable and productive companies. The situation we are in is temporary and those companies are still valuable and will soon be just as productive. My hope is the long-term institutional investors are looking at the big picture.
The older I get and the more I experience the more rage I feel at offshoring, mergers and buyouts, and the pirates that run these scams. I’m watching people get shown the door today… people who hired on at smaller companies in good faith and now are without a livelihood because BIGCO, INC can’t make their stock price and endless growth targets. And once they’re gone BIGCO will say to those left behind “sorry, you can only replace them with street-shitters”. I would like to see some zealous anti-trust enforcements in the US, but any official that could do such a thing is in on the racket.