US GDP Contracts by 32.9% as COVID-19 Halts Activity

The US, the world’s largest economy, contracted by 32.9 percent year-on-year in the quarter ended June 2020 as COVID-19 pandemic grounded business operations and other economic activities.

According to the Bureau of Economic Analysis, the figure is by far the worst reading on record.

On a quarterly basis, the economy contracted by 9.5 percent as consumer spending that supports two-thirds of the American economy nosedived due to COVID-19 lockdown and general disruption in economic activities during the quarter.

This was because of the decline in household incomes and surged in the unemployment rate during the period under review.

“This is something we have never seen before,” said Jason Reed, assistant chair of finance at the University of Notre Dame. “At first I felt it was like a natural disaster that had hit the entire country at the same time. Now it is evolving into something worse than that.”

On Wednesday, Jerome Powell, Federal Reserve Chair, said the second wave of COVID-19 has started weighing on the economy, adding that a recovery cannot be sustained unless the virus is under control.

Similarly, the Bureau of Labor Statistics on Thursday said 1.4 million Americans filed for jobless claims last week, indicating that projected recovery is stalling.

“We’re still digging out of a hole, a really deep hole,” said Ben Herzon, executive director of IHS Markit. “The second-quarter figure will just tell us the size of the hole we’re digging out of, and it’s a big one.”