The U.S. economy contracted at a 4.8% annualized pace in the first quarter. That’s the worst slide since 2008 and the first down quarter for growth since 2014. Consumer spending, no surprise in days of coronavirus shelter at home orders, led the decline (with a 7.6% drop) and business investment continued its pre-virus weakness. The drop in consumer spending was the worst since 1980 and the decline in business investment was the worst in almost 11 years.
The 4.8% drop was worse than the 4% decline projected by economists surveyed by Bloomberg. In January, before the pandemic, economists had forecast 1.6% growth for the economy in the quarter.
The second quarter is expected to show an even sharper drop. Bloomberg is projecting a 37% annual rate of contraction. It won’t be surprising if the second quarter pace is worse than in the first quarter since most of the first quarter–about 80%–came before social distancing restrictions fully shut down much of the U.S. economy.
This is the first read on GDP for the quarter. Economists expect that the drop will get larger with adjustments that capture more economic activity.
