US economy down 4.8% in first quarter as coronavirus ends record expansion

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The US economy contracted 4.8% in the first quarter, the largest drop since the financial crisis over a decade ago, as the coronavirus pandemic caused the country to nearly stop, ending the most long expansion never recorded.

Economists polled by Refinitiv expected the first estimate of GDP to drop 4%.

Gross domestic product, the widest measure of goods and services produced in the economy overall, fell at a seasonally adjusted annual rate of 4.8% in the three months from January to March, a Commerce said on Wednesday when it first read the data.

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It was the first decline in the first three months of 2014 and the worst since the first quarter of 2009, when the economy contracted 4.4% in the midst of the financial crisis.

However, the severity of the coronavirus-induced slowdown will be more clearly reflected in the second quarter, when the country’s economy almost stopped to limit the spread of the virus. Estimates vary widely – Goldman Sachs predicts a 34% drop – but economists agree that it will be bleak, perhaps beyond the worst of the Great Depression.

“The terrible number of headlines is even worse when you consider that the first two months of the first quarter were relatively normal and that this number only includes the blockades of March,” said Chris Zaccarelli, chief investment officer of ‘Independent Advisor Alliance.

“Since complete blockages continued until April and most states are likely to maintain at least partial blockages until May, this leaves June as the only month in the second quarter that could see a possible return to normal, “he added.

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The report likely reinforces economists’ belief that the coronavirus pushed the United States into a recession. Officially, a recession only occurs when the economy experiences two consecutive quarters of negative growth.

In the past five weeks, the number of American workers who first applied for unemployment benefits has jumped to 26 million, indicating that the unemployment rate is close to 16%, which is significantly higher than what ‘It was during the worst of the Great Recession.

Consumer spending – which generally accounts for about two-thirds of total GDP – plunged 7.6% in the quarter, as states ordered businesses not to close and residents ordered to stay at home. Business investment fell 8.6%.

The government has tried to alleviate the economic pain inflicted by the virus epidemic with four stimulus packages, including the CARES $ 2.2 trillion law – the largest in recent memory – passed in late March.

Later Wednesday, the Federal Reserve, after its two-day meeting, will offer its final assessment of the state of the economy and could provide further guidance on how it plans to foster a recovery in the United States.

The US central bank has focused all of its firepower on the economy, including lowering interest rates to near zero, launching lending programs in times of crisis to support spending and making massive purchases of Treasury securities.

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