With widespread coronavirus restrictions and business shutdowns across the United States, the country has suffered a significant slowdown in economic activity and consumer spending, which has resulted in falling national growth rates.
The US economy plunged by an annual rate of 32.2% in the second quarter of 2020, the fastest pace in American history, due to lockdown measures caused by the COVID-19 health crisis, according to the Commerce Department.
“Real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, according to the ‘advance’ estimate released by the Bureau of Economic Analysis”, the department’s news release reads.
According to first estimates, the fall in GDP during the second quarter, from April to June, was mostly explained by a drop in consumer spending, which was down by 34.6% on an annualised basis.
The decline is believed to be the most dramatic one recorded since the US government began documenting these figures in 1947. The previous sharpest drop of 10% occurred in the second quarter of 1958. The figure is still more optimistic than was initially expected by economists, who predicted a 34.7% decline, according to surveys conducted by Dow Jones.
In the first quarter of 2020, US GDP fell at an annual rate of 4.8%, according to the Bureau of Economic Analysis, already a significant drop from the 2.1% increase seen in Q4 2019.
US Economic Activity Revitalises to Then Slow Down Again
The drop in GDP figures came as a combination of sharp declines in personal consumption, spending and investments, with the personal consumption expenditures price index dropping to 1.9% in Q2. Personal income figures still remain high though, possibly due to large cash infusions initiated by the Trump administration to help American businesses and consumers stay afloat during the pandemic. As such, personal disposable income rose by 42.1% to $1.53 trillion in total during this period.
April is believed to have been the most disastrous month in terms of decay in economic activity, with most factories, businesses, restaurants and non-essential shops being shut down across the country. Economic vitality is believed to have been revived in May, though, but with a renewed rise in the number of coronavirus cases throughout the country, especially in the Southern regions of America, the economic resurgence has been halted, as acknowledged by Federal Reserve Chair Jerome Powell this week.