The U.S. Economy Shrank 4.8% in First Quarter
April 29, 2020
The American economy contracted in the first quarter at a rate not seen since the height of the 2008 financial crisis. GDP, the total measure of all goods and services produced by the nation’s economy, contracted by an annual rate of 4.8%, the largest annual decline since the fourth quarter of 2008.
Personal consumption, which accounts for nearly 70% of total GDP, took a larger than expected decline of 7.6%, the largest quarterly drop since 1980. Spending on services, which includes everything from tax prep to haircuts, fell by 10.2%, the largest decline since the government started compiling quarterly data in 1947. Spending on goods was down just 1.3%, as a drop in purchases of items like automobiles and appliances was offset by increased spending on food and household goods as people began to stockpile.
Economists see this quarter as the beginning of an almost certain recession, which requires two consecutive quarters of economic contraction. The first-quarter GDP data includes only the first few weeks of the current economic lockdown, and expectations for the second quarter are even direr, with some economists predicting a contraction as high as 30 or 40%.