By Alfonso Fernandez / Washington / The United States’ gross domestic product plummeted by a record annualized rate of 32.9 percent in the second quarter due to coronavirus-triggered stay-at-home orders issued by the vast majority of states, the Commerce Department reported Thursday.
Compared to the same quarter of 2019, the US economy plunged by 9.5 percent, the department’s Bureau of Economic Analysis said in its first reading on GDP data between April and June.
The annualized rate (the rate of growth or contraction over a year if GDP were to keep growing or contracting at the same quarterly rate for three more quarters) slightly beat the forecasts of economists, who had projected a 35 percent decline.
“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 BEA said.
“This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted or redirected their spending,” it added.
Consumer spending, with accounts for roughly two-thirds of US economic activity, contracted by 34.6 percent on an annualized basis.
After the economic carnage of the second quarter, economists expect growth to resume in the third quarter since several states started to gradually reopen their economies in June.
Nevertheless, that picture is complicated by renewed lockdown orders issued in states such as California, Texas and Florida that experienced an abrupt rise in new confirmed coronavirus cases.
The chairman of the US Federal Reserve, Jerome Powell, said at a remote news conference on Wednesday that “the pace of the recovery looks like it has slowed since cases began that spike.”
“I want to stress (that) it’s too early to say both how large that is and how sustained that is.”
Economists have consistently warned about the difficulty in making forecasts given the current level of extraordinary uncertainty.
“The key caveat (looking ahead to the third quarter) is that it will be a lot less better than we were expecting a few months ago,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, referring to the rising coronavirus case load.
The number of deaths attributed to Covid-19 in the US now exceeds 150,000, according to Johns Hopkins University’s Coronavirus Resource Center. That number represents 22.6 percent of all deaths worldwide, although the US has fared better thus far than some other countries, including Belgium and Spain, in terms of deaths per 1 million people.
In March, the US approved a $2.2 trillion economic stimulus package – the largest in the nation’s history – to counteract the negative impact of the coronavirus lockdowns.
Powell said Wednesday that that financial support, which included direct payments of $1,200 for adults (plus an additional $500 per child), has helped mitigate the financial disaster.
“The fiscal policy actions that have been taken thus far have made a critical difference to families, businesses and communities across the country,” the Fed chairman said.
But he added that “there will be a need both for more support from us and for more fiscal policy” from Congress.
Republicans in the GOP-controlled Senate this week unveiled a new $1 trillion stimulus plan that is far less ambitious than a more than $3 trillion relief package approved by the Democrat-controlled House of Representatives in May.
But even though the US unemployment rate stood at 11.1 percent at the end of June, far above the 3.5 percent jobless rate prior to the onset of the Covid-19 crisis in the US, negotiations on what would be the fifth round of coronavirus-related stimulus are fraught with complications.
Democrats want nearly $1 trillion in direct aid for state and local governments, while the Republican plan provides those administrations with no additional aid but would give them more flexibility in using already approved federal assistance.
Another sticking point is a $600-per-week unemployment benefit that expires on July 31. Democrats want to extend it until January, while Republicans want that federal assistance lowered to $200 a week through September. (July 30, 2020, EFE/PracticaEspañol)
News related in video (April 2020)