WASHINGTON, United States, Apr 29 – The decade of US economic expansion ended dramatically in the first quarter when GDP shrank 4.8 percent as the coronavirus hit, according to government data released Wednesday.
It was the biggest decline in GDP in 12 years as the pandemic forced businesses to close, halting purchases and investment, the Commerce Department reported.
The drop in the January-March quarter was slightly worse than expected, but the report noted it could not quantify the full economic effects of the virus. Most of the business shutdowns and stay-at-home orders only took effect in the final weeks of March.
The data was a sharp reversal from the last quarter of 2019, when the economy grew by 2.1 percent at a time when analysts were more concerned about whether President Donald Trump’s trade policies would continue to weigh growth down in 2020
The arrival of the coronavirus pandemic has upended that, leading to more than 50,000 deaths and about 26 million job losses since mid-March as the economy came undone.
As stores, offices and restaurants were shuttered, personal consumption plunged 7.6 percent in the first quarter, the Commerce Department said, as spending collapsed in a wide variety of sectors, including healthcare, motor vehicles and parts.
Exports fell as people traveled less, the report said, while imports also decreased.
However, analysts expect GDP to contract by double digits in the second quarter, when the data will show the full effects of the pandemic’s shutdowns.
“Thus ended the expansion which began in the third quarter of 2009; killed by COVID-19,” Ian Shepherdson of Pantheon Macroeonomics said.
“But these data capture only the squall before the second quarter hurricane, so it’s not going to change anyone’s mind on the future trajectory of the economy.”