America’s economy suffered a historic collapse in the second quarter of this year, with Commerce Department figures showing Gross Domestic Product (GDP) plummeting by 32.…
America’s economy suffered a historic collapse in the second quarter of this year, with Commerce Department figures showing Gross Domestic Product (GDP) plummeting by 32.9 percent in annualized terms as business activity ground to a halt due to the pandemic.
The unprecedented economic contraction, which is an advance estimate released by the Commerce Department’s Bureau of Economic Analysis on Thursday, is more than triple the previous all-time GDP drop of 10 percent in the second quarter of 1958.
“Markets were pretty much expecting a disastrous number, and they got it. The recovery is going to take time,” said Mizuho Securities USA chief economist, Steven Ricchiuto. [remove]
Most of the drop in GDP took place in April, when business activity ground to a halt as the country was under lockdown to curb the spread of COVID-19.
Many businesses resumed operations in May, fueling hopes for a quick rebound. But a resurgence of COVID-19 cases, especially in the densely populated south and west, are tempering hopes for quick economic recovery.
“The bottom fell out of the economy in the second quarter,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “The outlook is not very good. Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction.”
The Commerce Department said the second-quarter economic crash was driven by lockdowns sparked by the outbreak of COVID-19, adding that the dismal number likely does not reflect the full impact of the pandemic response.
“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 department said, adding, “This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending.
