- US gross domestic product fell at a record 33% annualized rate in the first quarter, the Commerce Department said on Thursday.
- Economists had forecast a 35% GDP contraction, reflecting the months when many US 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.
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It’s official: The coronavirus pandemic has led to the worst GDP slump in American history.
US gross domestic product fell at an annualized rate of 33% in the second quarter, the Commerce Department said on Thursday. It’s the largest fall on record dating back to the 1940s. Economists had expected a roughly 35% annualized drop, according to Bloomberg data.
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 US history.
In April, much of the country was operating under strict stay-at-home orders that brought much activity to a halt. 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.
“The decline in second quarter GDP reflected the response to COVID-19, as ‘stay-at-home’ orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses,” the Bureau of Economic Analysis report said.
The US is now grappling with spikes in COVID-19 cases that have threatened to derail the economic recovery from the pandemic recession. Many states have had to pause or roll back reopening plans to deal with new coronavirus cases, weighing on economic activity. Unemployment remains high, and consumer sentiment has slumped.
While stark, the historic GDP figures may appear worse than they are, because they are reported as an annualized rate. The forecast GDP drop of 35% on an annualized basis actually means the economy was about 10% smaller in the second quarter than in the first months of the year.
Still, the economy shrinking by 10% in one quarter is also a record slump. And Thursday’s figure is the first of three estimates, meaning it could be revised to reflect an even sharper contraction.
Economists expect that economic activity has picked up as states have reopened; those surveyed by Bloomberg expect that the economy will grow at an 18% annualized rate in the third quarter. Even though that would be a record positive jump, it would still leave GDP far below pre-pandemic levels.