A shopkeeper working inside his retail store as the phase one reopening of New York City continues during the outbreak of the novel coronavirus (COVID-19) in Brooklyn, New York City, US, June 9, 2020. (Reuters)
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Washington – The United States economy suffered its biggest blow since the Great Depression in the second quarter as the novel coronavirus (COVID-19) pandemic shattered consumer and business spending, and a nascent recovery is under threat from a resurgence in new cases of coronavirus.
The bulk of the deepest contraction in at least 73 years reported by the Commerce Department on Thursday occurred in April when activity almost ground to an abrupt halt after restaurants, bars and factories, among others, were shuttered in mid-March to slow the spread of coronavirus.
More than five years of growth have been wiped out. With the recovery faltering, pressure is mounting for the White House and Congress to agree on a second stimulus package. President Donald Trump, who is trailing Democratic challenger and former Vice President Joe Biden in opinion polls, said on Wednesday he was in no hurry. Trump on Thursday raised the possibility of delaying the November 3 presidential election.
“This is hard to swallow,” said Jason Reed, finance professor at the University of Notre Dame’s Mendoza College of Business. “Right now, the American economy is speeding toward a fiscal cliff. Not only do we need Americans to take serious action preventing the spread of the disease, but we also need Congress to agree on another stimulus package and quickly.”
Gross domestic product collapsed at a 32.9 per cent annualised rate last quarter, the deepest decline in output since the government started keeping records in 1947. The drop in GDP was more than triple the previous all-time decline of ten per cent in the second quarter of 1958. The economy contracted at a 5.0 per cent pace in the first quarter. It fell into recession in February.
Economists polled by Reuters had forecast GDP slumping at a 34.1 per cent rate in the April-June quarter.
On a year-on-year basis GDP fell a record 9.5% last quarter. Output shrank 10.6 per cent in the first half. The level of GDP has dropped to levels last seen in the last quarter of 2014.
Though activity picked up starting in May, momentum has slowed amid the explosion of COVID-19 infections, especially in the densely populated South and West regions where authorities in hard-hit areas are closing businesses again and pausing reopenings. That has tempered hopes of a sharp rebound in growth in the third quarter.
Federal Reserve Chair Jerome Powell on Wednesday acknowledged the slowdown in activity. The US central bank kept interest rates near zero and pledged to continue pumping money into the economy. (Reuters)