The U.S. economy saw the largest herd of activity it has ever known in the second quarter, though it was not as bad as fear.
Gross domestic product from April to June shed 32.9%, according to the Commerce Department’s first reading on data released Thursday. Economists surveyed by the Dow Jones were looking for a 34.7% decline.
Still, it was the worst fall ever, with the closest coming earlier in mid-1921.
“At the bottom line, the numbers are obviously alarming, but all of them caused by about half of the quarter reflecting a nearly full closure and the other half a slow opening,”; said Peter Boockvar, an official key investment in the Bleakley Advisory Group. “That being said, it reflects the hole from which we now need to climb out as we re-enter Q3 and Q4.”
Strong contractions in personal consumption, exports, inventories, investment and spending by state and local governments have all converged to reduce GDP, which is the combined pool of goods and services produced over the period.
Spending slips in health care and items such as clothing and footwear. A drop in inventory was driven by motor vehicle dealers, while spending on equipment and new family housing was successful when it came to investing.
Domestic purchase prices, a key indicator of inflation, fell 1.5% for the period, compared with a 1.4% increase in the first quarter when GDP fell 5%. The price index of personal consumption expenditure fell 1.9% after rising 1.3% in Q1. . In addition to food and energy, PCE “core” prices were out of 1.1%.
However, personal incomes have risen, thanks in large part to government transfer payments associated with the coronavorus pandemic. Current dollar personal income increased more than sixfold to $ 1.39 trillion, while disposable personal income reached 42.1% to $ 1.53 trillion.
Despite the increase, personal spending declined by $ 1.57 trillion, largely due to lower spending on services.
Neither the Great Depression nor the Great Recession nor any of the more than a dozen economic downturns that have declined over the past two centuries have ever caused such a strong fabric over such a long period of time. short.
By comparison, the worst quarter during the 2008 financial crisis was the decline of 8.4% of GDP in the fourth quarter of that year. The previous low water mark was a 10% slide in the first quarter of 1958, while the worst in recorded history came in Q2 of 1921.
This particular tumble in activity is due to a different source from each of its predecessors: a government-induced closure aimed at fighting Covid-19.
Workers across the country have been told to stay home from any work that is not considered essential, resulting in a crushed break that saw the unemployment rate at the 14.7% level, high after the Depression. The National Bureau of Economic Research said the current recession actually began in February, a month before the pandemic declaration. First quarter GDP fell 5%.
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