The fall is slightly less worse than expected by analysts, but it remains spectacular. The United States saw its GDP contract by 32.9% in the second quarter of 2020, according to a preliminary estimate from the Commerce Department released on Thursday. This historic drop marks the official entry into recession of the world's largest economy, after an already declining first quarter.
To calculate their growth, Americans use the annualized rate, which compares GDP to that of the previous quarter, and projects the development over the entire year at that rate. This differs from YoY, which compares GDP to that of the same quarter of the previous year. Comparison with other countries is therefore made difficult.
Consumption and investments plunge
According to the US Department of Commerce, this plunge "reflects the response to Covid-19, with containment measures imposed in March and April, partially offset by the reopening of part of the activity in certain regions of the country in May and June ”. The contraction in GDP, less than the 37% drop estimated by the International Monetary Fund, is largely due to the drop in consumer spending - a major component of Gross Domestic Product - which fell by 34.6% in the second quarter, also at an annualized rate.
Spending on services, one of the sectors most affected by the crisis, fell 43.5%. Private investments have fallen by 49%. And unsurprisingly, federal government spending jumped 17.4%, due to financial assistance to households and businesses. Consumer prices also fell 1.9% in the quarter, when they were up 1.3% in the first quarter, according to the PCE index also released Thursday.
The number of cases still at the highest
In the first quarter, the GDP of the world's largest economy fell 5% under the effect of containment measures imposed in mid-March. The United States grew 2.3% in 2019, and President Donald Trump, who had made the health of his economy an argument in his race for re-election, was aiming for 3% per year.
Meanwhile, the upsurge in Covid-19 cases, especially in the South and West, has prompted a large part of the country to put a stop to the reopening, or even to partially reconfine. Consequence: new jobless claims have recorded two weeks of increase since mid-July, while they have fallen from the record recorded at the end of March. From July 20 to 25, 1.43 million new Americans were unemployed.
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