New data showed that US economic activity in the first quarter contracted at an annual rate of 5 per cent, the biggest quarterly decline since the 2008 financial crisis, in the wake of the COVID-19 pandemic, the Commerce Department reported.
The decrease in real GDP in the first quarter reflected negative contributions from personal consumption expenditures, private inventory investment, non-residential fixed investment, and exports that were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending, according to the report released by the Commerce Department’s Bureau of Economic Analysis on Thursday.
With the second estimate, a downward revision to private inventory investment was partly offset by upward revisions to personal consumption expenditures and non-residential fixed investment, Xinhua news agency quoted the report as saying.
“Stay-at-home” orders issued in March and other measures in response to the COVID-19 outbreak led to rapid changes in demand, as businesses and schools switched to remote work or cancelled operations, and consumers cancelled, restricted or redirected their spending, the Bureau said.
The revised GDP data came on the same day as the Labor Department reported that another 2.1 million Americans filed for jobless claims last week, bringing the 10-week total to more than 40 million.
The US Federal Reserve, however, said in its latest Beige Book released Wednesday that “contacts cited challenges in bringing employees back to work, including workers’ health concerns, limited access to childcare, and generous unemployment insurance benefits”.
Earlier this month, the Labor Department reported that US employers cut a staggering 20.5 million jobs in April, which erased a decade of job gains since the global financial crisis and pushed unemployment rate to a record 14.7 per cent.
Federal Reserve Chairman Jerome Powell recently said the unemployment rate could peak around 20 per cent or 25 per cent, and the US economy could shrink dramatically in the second quarter, at an annualized rate of more than 20 per cent or 30 per cent.
Amid mounting economic pressure, US states, many without seeing a significant downward trend in COVID-19 infections, have started to fully or partially reopen their economies since late April.
As of last week, all states had already been in some phase of reopening.
Currently, the US has 1,721,479 confirmed cases and 101,573 deaths, both tallies account for the highest in the world.