Everybody knew it was going to be bad, but the sharp drop in second-quarter GDP was still sobering.
Economic activity fell at an annual rate of 32.9 percent in the quarter, which started in April, just after the coronavirus sent millions of people home, closing stores, restaurants and so many other businesses.
In Bureau of Economic Analysis, which tallied the numbers, noted: “The decline in second-quarter 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.”
But the scope of the drop is hard to fathom.
Ben Herzon, senior economist at IHS Markit, said, “To put this in a recent historical context, the worst quarter of the Great Recession was the fourth quarter of 2008, when real GDP contracted at an 8.4 percent annual rate.”
GDP fell 5 percent in the first quarter, which itself was a giant step down from three quarters of roughly 2 percent growth and enough to officially mark the beginning of a recession, with the National Bureau of Economic Research setting February as the most-recent peak of economic activity.
While the quirks of working staying closer to home have seen some strength — including ath-leisure, running shoes, hiking boots and Netflix subscriptions among them — none of it has been enough to offset a historic corporate shutdown.
Personal consumption expenditures fell 34.6 percent in the second quarter as people and businesses rearranged their priorities.
Economists are projecting a significant bounce back in the third quarter, although still not enough to get the economy back to year-over-year growth.
But even as the country has reopened, it’s been some tough sledding with worrying spikes of COVID-19 in Florida, Texas, California and elsewhere with some social distancing restrictions coming back and closing certain sectors back down.
That has economists forced into trying their hand at being epidemiologists and looking at the virus as the only real economic indicator that matters right now.