July 31, 2020
The U.S. economy plunged to a record-setting level in Q2 2020, as real gross domestic product (GDP) decreased to an annual rate of 32.9%, according to a report from the Bureau of Economic Analysis. The estimate of the Q2 drop has no comparison since the government began keeping records in 1947. In the first quarter, real GDP decreased 5%.
The decline in Q2 GDP reflected the response to COVID-19, as “stay-at-home” orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses. This led to rapid shifts in activity, as businesses and schools continued remote work and consumers and businesses canceled, restricted, or redirected their spending.
The government indicates the full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.
The decrease in real GDP reflected decreases in personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending.
Many analysts expected a sharp rebound for the current July-September period, but a surge in COVID-19 related shutdowns has obscured that outlook with a dark cloud.
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