The coronavirus pandemic hit the economy so hard that the country’s GDP fell 4.8%, abruptly ending the longest economic expansion on record.
Gross domestic product, which measures the production of goods and services, fell 4.8% in the first quarter on an annualized basis, according to a first estimate from the Ministry of Commerce released Wednesday morning.
This is the biggest drop since the Great Recession, which ended in 2009. Economic growth was at 2% or more until mid-March.
With most of the country stuck at home, large swathes of the economy have shut down, putting 26 million people out of work. Consumer spending, which is the source of about two-thirds of economic growth, has collapsed.
While Wall Street prepared for the data, the worst is yet to come. First quarter data has grabbed economic activity through the end of March, but the second quarter is likely to include three straight months of decline.
âYou’re looking at something like minus 20% to minus 30% in the second quarter,â White House economic adviser Kevin Hassett said. told CNBC on Monday, noting that the coronavirus is “the biggest shock since the Great Depression. It’s a very serious shock and it’s something we need to take seriously.”
The Congressional Budget Office estimated second-quarter GDP to be down as much as 40%, for the worst quarter since 1947.
Economists say the United States likely entered a recession – generally defined as two consecutive quarters of declining GDP – in the second half of March, when the closures began.
âYou’re really going to see the economy rebound in July, August and September,â Treasury Secretary Steven Mnuchin told Fox News earlier this week. “You see trillions of dollars going into the economy and I think it’s going to have a significant impact,” he said of the government’s $ 2 trillion emergency stimulus package intended to support the economy.
Attention now turns to the Federal Reserve, which concludes its two-day policy-making meeting on Wednesday afternoon. Fed Chairman Jerome Powell is expected to reiterate the central bank’s measures to support the economy and relay its outlook for the coming months.
Over the past six weeks, the central bank has lowered interest rates to near zero, expanded its bond buying programs, changed reserve requirements and offered special financing for small businesses.