The U.S. economy slowed at an annual rate of 32.9% in the April-June quarter as the country struggled with spending cuts during the pandemic.
It was the deepest decline since the government began keeping records in 1947 and three times more severe than the previous 10% record set in 1958.
Reduced spending on services such as health care has driven the fall.
Economists said they expected to see the sharpest decline in the second quarter of the year, with the recovery after that.
But as virus cases in the U.S. increase and some areas re-impose restrictions on activity, the rebound is showing signs of a halt.
More than 1.4 million people filed new unemployment claims last week, up from the previous week for the second week in a row. Other data indicate spending cuts and falls in confidence in July.
Jerome Powell, the head of America’s central bank, on Wednesday warned of a renewed downturn, describing the downturn as the most “severe in our lives”.
He urged more government spending to help American families and businesses suffer the crisis.
That call was reiterated by other business leaders on Thursday as figures drew attention to the magnitude of the economic crisis the country is facing.
“The shocking news of the historic decline in gross domestic product in the second quarter has shocked us all,” said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, a lobby group for business. “This discarded news should make Congress move fast.”
- The Fed warns of the continuing need to protect the U.S. economy
- The German economy is suffering a sharper decline on record
The International Monetary Fund has predicted that global growth will slow by 4.9% this year. On Thursday, Germany reported a record quarterly decline of 1.1%, while Mexico’s economy also reported a double-digit contraction.
Compared to the same quarter a year ago, the U.S. economy plummeted 9.5%. Exports and imports fell more than 20% from a year ago, while consumer spending – the main driver of the U.S. economy – fell by 10.7% year-on-year.
The United States has lost nearly 15 million jobs since February, despite strong engagement in May and June. The U.S. Census estimates more than half of American adults live in families who have seen incomes cut short by the pandemic.
Economists have warned it will take years for the United States to recover from the devastation.
“Even when the economy saw a rapid auction back in May and June, the Covid-19 economic shock caused so much damage in previous months that the net result was an economic catastrophe for the second quarter of the year,” wrote Josh Bivens , director of research at the Institute for Economic Policy.
“The fact that initial jobless claims have risen for the second week is worrying and highlights that the recovery in consumption is still at risk,” said Madhavi Bokil, vice president of the Investor Service. of Moody’s.
At the Bean Post Pub, in New York City, owner Anthony LoPorto said he continues to struggle to fill his tables and is worried about what autumn and winter will bring.
“I don’t believe in the quick win of anything,” he said. “There’s just not enough money in people’s pockets and enough shortage in people’s spirits.”