Daily Management Review

US GDP collapses in Q1 for the first time in six years


The US economy in the first quarter fell by 4.8% in terms of annual rates, according to a preliminary report by the US Department of Commerce.

Daniel via flickr
Daniel via flickr
The decline took place for the first time from January-March 2014, when GDP fell by 1.1%. At the same time, it became the highest since the fourth quarter of 2008 (minus 8.4%).

Analysts on average predicted a less significant drop: respondents to Trading Economics expected a decline of 4%, those polled by The Wall Street Journal expected a decrease of 3.5%.

The growth of GDP in the fourth quarter was 2.1%.

At the same time, experts note that the report of the Ministry of Commerce reflects only the very first consequences of the restrictive measures taken by the authorities to contain the pandemic of the coronavirus infection. The closure of enterprises and schools, social distance and other steps were introduced in the last three weeks of the quarter. Analysts predict a fall in GDP in the second quarter of 25% or more, some expect 40%.

Until this year, the US economy has shown the longest growth period in its history with an average rate of about 2%, it lasted 11 years.

Consumer spending, which accounts for two-thirds of US GDP, fell 7.6% in the first quarter, calculated at an annual rate. This is a record decline since 1980.

The volume of exports in January-March fell by 8.7%, imports collapsed by 15.3%.

Investments in equipment companies fell by 15%. At the same time, government spending increased slightly.

The growth of the PCE Core Index (Personal Consumption Expenditures, Excluding Food & Energy), which the Federal Reserve carefully monitors when assessing inflation risks, accelerated in January-March to 1.8% from 1.3% in the previous three months. The Federal Reserve targets this metric at 2%.

The information provided by the Ministry of Trade on Wednesday is the first estimate of the change in US GDP out of three. The publication of the revised data is scheduled for May 28 and June 25.

source: cnbc.com