US battles severe economic depletion, records 4.8% nosedive

The United States has been the hardest hit country by the coronavirus pandemic as its GDP shrank by 4.8% in the first quarter of the year.

While disclosing this on Wednesday April 29, 2020, the Commerce Department estimated that it was the sharpest decline in GDP since 2008 when the annual economic rate contracted by 8.4%

According to chief economist at PNC, Gus Faucher, the US now has to battle recession.

“The US economy is in recession right now. We just don’t know how deep,” said Faucher

Due to the coronavirus outbreak, since mid-March, businesses in the united States have been shutdown which has correspondingly engendered million cases of layoffs across the country as much of the economies continue to take a nosedive.

Business investment also got down by 2.6% and sharp 15.5% drop in investment in equipment.

This directly caused sharp reduction in consumer spending which account for 70% of economic activity in the country. This consequently brings an end to the longest economic expansion in history.

Gregory Daco who is the chief economist at Oxford Economics said,
“The longest U.S. economic expansion has ended.”

Now that consumer spending has dropped at 7.6% annual rate in the first three month of the economic year, this would be the sharpest decline since 1980.

It has also been predicted that the current fall in the GDP is just an indicator for what the GDP would look like in the next quarter. Considering the prediction of the senior economic adviser to the white house, Kevin Hassett, the GDP could drop by 30% at the annualized rate.

Amidst the sharp drop in the GDP, trade however proffered a brief respite to the GDP report as it added 1.3% points in the quarter.

The government expenses though went up by 0.7% in the first quarter which is more likely to increase because of different rescue packages recently approved by the Congress which would necessitate further expenses on the part of the government.