US GDP in the second quarter fell by 32.9%. Pandemic COVID-19 “froze” the whole industry, reducing business investment and consumer spending, which faced high level of unemployment in the country. President Donald trump suggested the possibility of postponing the presidential elections.
According to a report by the Commerce Department Thursday, the fall of the gross domestic product (GDP) for the period from April to June (2nd quarter) amounted to 32.9% compared to the same value.
Economists noted that this was the strongest decrease since, as the government began keeping records in 1947, after the Second world war. Earlier in U.S. history, GDP has never fallen by more than 10%.
However, the value at 32.9% was expected, since the average estimate of analysts amounted to 34.1% of GDP decline.
Looking back at the first quarter (January-March 2020) – the fall in GDP was only 5%, as the crisis of the pandemic in the country began in early March.
In June, the Committee of the National Bureau of economic research announced Feb 2020 beginning of a US recession and the end of the almost 11-year period of economic growth.
The pandemic has caused the strongest decline in consumer spending, which accounts for about 70% of economic activity. Consumer spending in the 2nd quarter decreased by 34% (compared to value), as due to quarantine measures, was “frozen” entire industries – such as tourism, transportation industry, the cruise industry, the company’s entertainment and restaurant areas. Americans have dramatically reduced their hospital visits and health care costs.
Many factories and enterprises were forced to cut production and temporarily shut down. The crisis was exacerbated by falling oil prices amid oversupply and a sharp drop in demand. The country’s exports declined by 64 percent in the second quarter, exceeding the decline in imports by 53%. Investments in different business areas also declined sharply due to the uncertainty of the macroeconomic situation.
The inflation rate declined to 1.9% in the second quarter after rising at the beginning of the year. The cost of many goods and services fell as companies cut prices, trying to increase sales. Economists say that inflation will probably remain low until the pandemic will not disappear.
The V-shaped US economic recovery not yet in sight
Every month 2nd quarter optimistic assessment of experts on the rapid recovery of the US economy gave way to predictions that can take months, if not years, before the economy and trade is fully restored.
The conditions for this will dictate the pandemic COVID-19, success in the production of the vaccine, and US trade policy, especially with the largest partner of China.
The latest economic data for July showed that the pace of recovery slowed because of new outbreaks in the southern and Western States of the USA. Over the last two weeks has worsened the employment rate.
On Wednesday, the fed announced the decision to maintain the rate of zero and continue measures to support the economy.
An important issue on the agenda in the United States remains the decision of Congress on additional unemployment benefits. This Friday is the deadline for additional unemployment benefits of $600 a week, without this assistance, the Americans will face an even greater decline in their income.
Another important piece of news on Thursday was the statement of President Donald trump about what he is looking for the possibility of postponing the presidential election in November. The President explains that the risk of infection COVID-19 population, while the Democrats are about remote voting considers the risk of the potential falsification of election results.
Trump has no authority to postpone the election, but the Constitution gives Congress the right to set a date for a vote. However, members of both factions said they did not see any likelihood that the elections will be postponed.