The Department of Commerce revealed this morning that in the second quarter of the year the United States’ Gross Domestic Product (GDP) contracted 32.9%,
Markets and economists were prepared for a terrible news today, since everything warned that between April and June the main economy in the world suffered the worst drop in its history as a result of the pandemic.
The Office of Economic Analysis revealed this morning that in the second quarter of the year the Gross Domestic Product (GDP) of the United States contracted 32.9%, lightly cipher more optimistic than the consensus of economists, who projected a drop of close to 34.7%.
The catastrophic result was a consequence of the extensive closings and blockades that most of the country’s states adopted during most of the period, which, although they started in March, they did not fully impact the data for the first quarter, and the effect was more reflected between April and June.
According to the Government Office, the sharp decline in GDP came from the convergence of a fall in personal spending, exports, business investment, and spending by state and local governments. Personal spending, which represents about two thirds of the Product, fell 34.6%, also the highest amount recorded.
Just for reference, the Product of China fell 6.8% in the first quarter of this year, in what is estimated to be its most critical period as a consequence of the pandemic, an incomparable figure with what was released today in the US.
Today’s data became in the most brutal crash the US economy has suffered since the 10% drop in the first quarter of 1958, according to the series that begins to have records in 1947. Prior to this, there would have been an even worse fall in the second quarter of 1921, but it is not included in the official figures.
With this, the 5% drop in economic activity during the first quarter – which was considered critical at the time – was also largely crushed. And on the same line, the peak The financial crisis was also largely overcome, since in said recession the most negative point was the 8.4% drop in GDP, registered in the fourth quarter of 2008.
What comes next?
Although the contraction released today is expected to be the deepest that the world’s main economy suffers as a result of the pandemic – and that the recovery has begun in the current period – there are those who look with concern at the sustained rise in the cases that have been reported in recent weeks, which has already led some states to postpone reopenings or even reverse them.
For now, recent data maintains the hope that the improvement in activity towards the end of the second quarter will continue for the current period, considering, for example, that 7.3 million jobs were created between May and June, after an unprecedented loss of 20.5 million jobs in April.
A survey carried out by Bloomberg at the beginning of the month estimated growth of 18% for the third quarter in the country. If this happened, it would also exceed the maximum expansion that the country has recorded in its history, of 16.7% in the first quarter of 1950.
Unemployment benefits
At the same time that GDP was revealed, the Labor Department announced that new applications for unemployment benefits reached 1.43 million the week until July 25, which was in line with the figure. from last week and practically also with the projection of the economists surveyed by Dow Jones, who expected an increase to 1.45 million.
This implies that for the second consecutive week, the application for the benefit increased after decreasing for 15 consecutive weeks. And also, it means that for the nineteenth consecutive week the subsidy applications exceeded one million people.
Continuing claims, that is, those receiving these unemployment benefits for at least two consecutive weeks, increased by 867,000 people to 17,018 million Americans.
The publication of the data was released at a key moment for the negotiations of a new stimulus plan for the country, when the White House and Congress are trying to define a new relief package before tomorrow, which the secretary of the government said yesterday. Treasure Steve Mnuchin is “very far from the deal.”
In these negotiations, a key point -both because of the urgency, because it expires tomorrow, and because of the importance for the economy-, are these same unemployment benefits, since the Democrats aim to keep them until March and entirely -US $ 600 weekly- while Republicans want to reduce them to $ 200 a week and for just two more months.
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