The economy contracted at a historic 32.9% annual rate in the second quarter, the Bureau of Economic Analysis reported Thursday in a preliminary analysis.
The negative growth in the second quarter comes on the heels of the economy contracting at a 5% rate in the first quarter.
The contraction in Thursday’s report is by far the largest in U.S. history. Until now, the largest drop in GDP was at a 10% rate in 1958, according to the Commerce Department’s Bureau of Economic Analysis.
The largest drop in GDP during the Great Recession from 2007 to 2009 was 8.4%.
Economists expected a contraction of 34%, at an annual pace, from the start of April to the end of June.
The economy has recovered since the worst of the pandemic, but the comeback has been slowed spikes in coronavirus infections that paused consumer spending in many parts of the county, according to Federal Reserve Chairman Jerome Powell.
“People aren’t going out to restaurants, bars, gas stations, pharmacies, and salons,” he said on Wednesday.
Google’s Community Mobility Report supports the chairman’s analysis. Its July 25 report shows that foot traffic to places such as restaurants, cafes, shopping centers, theme parks, museums, libraries, and movie theaters is down 19% overall from January and early February, before the pandemic hit the United States.
In virus hot spots, the decreases are larger. In Florida, which has over 450,000 cases, foot traffic is off by 26%. California, with over 475,000 cases, has 33% less foot traffic to these destinations.
Pundits expect the economy to rebound in the third quarter, but Powell warned that the economic recovery will largely depend on controlling the coronavirus.
“I would be remiss in not stressing this enough: the path of the economy is going to depend to a very high extent over the course of the virus and the measures that we take to keep it in check,” he said.
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