The health crisis closes a decade of growth in the United States

  •   30/04/2020 - 14h44
  •   HARMANT Adeline

If the French GDP marks a sharp drop this morning, the same applies to the United States, where the coronavirus crisis has just put an end to a period of almost 10 years of growth. The American GDP published on Wednesday shows indeed a decline of 4.8% for the first quarter 2020, which represents the strongest fall since the crisis of 2008.

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The health crisis closes a decade of growth in the United States
Image copyright: Shinya Suzuki - Flickr

The largest decline in US GDP since 2008 :

Because of the current covid-19 pandemic, the United States is coming to the end of more than a decade of growth with a GDP that yesterday showed a decline of 4.8% for the first quarter of 2020 at an annual rate. It is thus the strongest fall of GDP recorded in the USA since the fourth quarter of 2008 and according to a preliminary estimate published by the Department of Commerce during the day of Wednesday April 29.

On the other hand, the Commerce Department, which released the indicator, also warns investors that the full economic effects of the covid-19 pandemic cannot yet be quantified in this estimate of GDP for the first quarter of this year. Indeed, the world's leading economic power did not begin to suffer the adverse effects of this pandemic until the very end of that quarter, with a gradual halt in its production as the virus progressed in the country. A much more pronounced second quarter with a much greater drop in GDP is therefore expected.

Fed Chairman Jerome Powell warned in an official press release that the U.S. economy will fall to an unprecedented level in the second quarter. The report further states that the extent and duration of the US economic slowdown is more than uncertain and will depend largely on how quickly the virus is brought under control. He stressed that the Federal Reserve is working to ensure as robust a recovery as possible.

 

A fall that had not been anticipated at such a level:

The containment measures thus caused a sharp drop in demand with companies and schools teleworking and cancelling certain activities, but also due to a cancellation or drastic drop in household consumption.

In 2019, US growth was 2.3% and Donald Trump was aiming for 3% per year for the current year, banking on this growth for his re-election.

However, while the decline in GDP was expected, it was stronger than expected as analysts were forecasting a 4.3% drop. Since the major economic crisis of 2008, the United States had not experienced such a massive drop in its economy. However, it should be remembered that this decline had then reached 8.4%. It now remains to be seen whether this bearish record will not finally be broken when the figures for the second quarter of 2020 are published.