The coronavirus pandemic sent the U.S. economy plunging by a record-shattering 32.9% annual rate last quarter. It is still inflicting damage across the country, squeezing already struggling businesses and forcing a wave of layoffs. (July 30)
GREG MCBRIDE: Today's GDP number is essentially the report card on how the economy performed during the second quarter. Now, we knew it was going to be bad. But this one set records for all the wrong reasons. The economy and the value of all goods and services-- that's what GDP is when you add all that up-- that-- that number at an annualized rate shrunk at almost 33%.
Not only is that the highest any of us have ever seen, the highest that's on record, but it's more than three times the number that had been the steepest contraction prior to this. And that was all the way back in the '50s.
So-- so consumer spending absolutely dropped off a cliff. When we look at that second quarter number, the economy shrank almost 33%. Consumption was down 34%. That's no coincidence that those numbers are close to one another simply because as the consumer goes, so goes the economy. That is something that's going to impact other countries as well, many of whom are dependent upon the US buying what they export.
So we've dug ourselves a big hole here in the first half of the year. And it's going to take years, not months, to recover that. So we may see on paper an impressive rate of economic growth as the economy rebounds in the third quarter and in the fourth quarter, but here's how the numbers work. You have a 33% contraction. You need a 50% expansion to get back to breakeven. So it just illustrates how deep that hole is.