US economy slides 4.8% in 1Q20

By ECCT staff writers

The United States’ economy has had its worst performance since the great recession in 2008 in the first quarter of 2020 (1Q20).  

According to a preliminary estimate by the Bureau of Economic Analysis published on 29 April, gross domestic product (GDP), or the value of all goods and services produced by the economy, shrank at a 4.8% year on year in 1Q20, marking the sharpest fall since the 8.4% contraction at the end of 2008.

The BEA attributed the decline to “stay-at-home” orders issued in March, which it said 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.

Consumer spending, the largest driver of US economic growth, fell 7.6%, the sharpest decline since 1980 as consumers cut spending on restaurants and travel. Counter-intuitively, healthcare was one of the sectors where spending fell, as hospitals stopped performing lucrative elective surgeries in order to focus on coronavirus patients.

The extent of the economic trauma was made clear last week when the US labour department said 26 million Americans had filed jobless claims over the past five weeks.

The US congress has approved around US$3 trillion in stimulus spending over the past two months, including payments to individuals and US$659 billion for small business loans and is now in talks for an additional US$2.2 trillion package.