More than five years of continuous growth was potentially wiped off the economy of the United States in the second quarter by the novel coronaviruss pandemic which hit consumer and business spending resulting in a possible contraction in the period at a pace that was the steepest since the Great Depression, claimed reports quoting economists.
It is expected that the US the Commerce Department will report that the majority of the historic contraction in gross domestic product happened in the month of April when economic activities almost came to a standstill in the country with the sudden shutting down of restaurants, bars and factories among others in order to stop the spread of the pandemic.
And even though economic activities gathered pace in May, there has been another slowdown because of resurgence in new cases of the Covid-19 in the densely populated South and West regions of the US where authorities have been forced to close down businesses again or have delayed reopening. That has tempered hopes of a sharp rebound in growth in the third quarter.
The slowdown in economic activity was acknowledged by Federal Reserve Chair Jerome Powell on Wednesday. While pledging to continue pumping money into the economy, the US central bank kept interest rates near zero.
"The bottom fell out of the economy in the second quarter," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. "The outlook is not very good. Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction."
According to a Reuters survey of economists, there had probably been a 34.1 per cent drop in the last quarter at an annualised rate for the gross domestic product of the country. If that it true ti would be the steepest such contraction in the US economy since the government started keeping records in 1947.
Such a drop will also eclipse the previous record for contraction by more than three folds when the US economy had contracted by 10 per cent in the second quarter of 1958. On a non-annualized basis, GDP likely tumbled 10.6 per cent. The economy contracted 5 per cent in the first quarter.
"The forecast implies that the level of real GDP actually fell by roughly 11 per cent in the first two quarters of 2020," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. "If so, that would wipe out more than five years of growth, and pull real GDP back to its levels last seen in the middle of 2014, at least as currently reported."
(Sourcee:www.channelnewsasia.com)
It is expected that the US the Commerce Department will report that the majority of the historic contraction in gross domestic product happened in the month of April when economic activities almost came to a standstill in the country with the sudden shutting down of restaurants, bars and factories among others in order to stop the spread of the pandemic.
And even though economic activities gathered pace in May, there has been another slowdown because of resurgence in new cases of the Covid-19 in the densely populated South and West regions of the US where authorities have been forced to close down businesses again or have delayed reopening. That has tempered hopes of a sharp rebound in growth in the third quarter.
The slowdown in economic activity was acknowledged by Federal Reserve Chair Jerome Powell on Wednesday. While pledging to continue pumping money into the economy, the US central bank kept interest rates near zero.
"The bottom fell out of the economy in the second quarter," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. "The outlook is not very good. Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction."
According to a Reuters survey of economists, there had probably been a 34.1 per cent drop in the last quarter at an annualised rate for the gross domestic product of the country. If that it true ti would be the steepest such contraction in the US economy since the government started keeping records in 1947.
Such a drop will also eclipse the previous record for contraction by more than three folds when the US economy had contracted by 10 per cent in the second quarter of 1958. On a non-annualized basis, GDP likely tumbled 10.6 per cent. The economy contracted 5 per cent in the first quarter.
"The forecast implies that the level of real GDP actually fell by roughly 11 per cent in the first two quarters of 2020," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. "If so, that would wipe out more than five years of growth, and pull real GDP back to its levels last seen in the middle of 2014, at least as currently reported."
(Sourcee:www.channelnewsasia.com)
