The U.S. economy contracted sharply in the first quarter of 2020

[Febo]

The U.S. economy contracted at its fastest rate since the Great Recession.
GDP fell 4.8% in January to March, compared to the previous quarter.
Consumer spending fell sharply.

https://www.weforum.org/agenda/2020/04/the-u-s-economy-contracted-sharply-in-the-first-quarter-of-2020


But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!! 

[adaseb]

The U.S. economy contracted at its fastest rate since the Great Recession.
GDP fell 4.8% in January to March, compared to the previous quarter.
Consumer spending fell sharply.

https://www.weforum.org/agenda/2020/04/the-u-s-economy-contracted-sharply-in-the-first-quarter-of-2020


But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!! 

Well to prevent the Q2 GDP from being worse they need to open the economy first. Hence why they are slowly trying this now with different states. Most likely they will see if the curve stays flattens and if it does other states will follow. However if it fails and the open states get an exponential increase of cases then obviously everything will be locked down again.

The USA closed later because the planes were banned to and from China and trump assumed this would be enough. However I think the people who were travelling from Iran and Italy were the ones that brought it into areas such as Washington and New York and made a huge impact.

Things are looking very bad and hence why we need that vaccine as soon as possible.

[exstasie]

But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!! 

Venues were shutting down, people stopped traveling and going to restaurants and bars, etc. weeks before governors issued lockdown orders. The fear of the pandemic (and the economic impact) is a much larger force than the government orders themselves. GDP growth was already weak heading into all of this too.

Q2 numbers will probably be brutal, yes. Most estimates are in the 40%+ contraction range. Somehow, there is still optimism for a V-shaped recovery in the second half of the year. I am not convinced of that myself.

[royalfestus]

The process of country economic recovery for America will be very expensive and they dont care what it will cost the Government. They understand how important it is to start early even without containing the spread of the virus. The clause to the available business loan should absorb a large number of unemployed citizen in short while but the inflation is lightly spoken about, which I think may be devastating on the long term. It is important that the government open the borders early for export, import and other migration process.

[bits4books]

I think you're overreacting. The drop in GDP is due to the closure of most shops, air transport and tourism.
Yes, there will be drawdowns in the economy and they will be quite noticeable. But how quickly it all started - so quickly everything will recover, I believe. Those who have survived-will open their doors again everything will be fine. This is a crisis but in contrast to the 2008 crisis. it is caused by external factors and not by the madness in the derivatives market.
Everything will be fine, we just need to wait

[Sword555]

We will see bigger drops soon. But everything will be fine in the next year, market is always recovering

[abhiseshakana]

Keep in mind, consumer activity is the cornerstone of the economy in the United States. The contraction was experienced because the efforts made to stem the spread of the coronavirus have forced many companies in the US to close and consumers not to leave their homes. The decline in the first quarter was led by the sharpest decline in consumer spending triggered by encouraging consumer actions to practice social distancing restrictions and a number of places that used to be a means of interaction such as restaurants, schools and workplaces have been closed to suppress the spread of the coronavirus.

Severe contractions are also a domino effect of the global slowdown due to a pandemic. The economic indicators that have been hit are falling demand, falling oil prices, increasing unemployment.

Economic growth in Q1 was still helped because from January to February there was a recovery momentum from 2019, consumption, investment, and even exports showed positive developments. Even consumption until March the first week is still good. The situation in the second quarter of 2020 will be different. Consumption, investment, and exports will be affected because the World Health Organization (WHO) has announced the coronavirus as a global pandemic.

[figmentofmyass]

I think you're overreacting. The drop in GDP is due to the closure of most shops, air transport and tourism.
Yes, there will be drawdowns in the economy and they will be quite noticeable. But how quickly it all started - so quickly everything will recover, I believe.

i don't mean to be a downer, but this could go on for years. since there is no vaccine or herd immunity, experts are expecting cases to rise again after reopening---not to mention during the winter flu season. are you gonna feel safe flying in airplanes, eating in restaurants/bars, shopping often? lots of people won't.

and then you have the economic damage: so many people will be broke (and unemployed) after this, not spending money. as abhiseshakana points out, consumer spending is vital to the american economy. it accounts for something like 70% of all economic activity.

without a miracle treatment/vaccine, i don't see a quick recovery happening.

[Febo]

I think you're overreacting. The drop in GDP is due to the closure of most shops, air transport and tourism.

Yes it is but in USA it only happened in few weeks of March. January and February were normal months.  I am not overeating. If few March weeks had such impact on GDP how will have April total lock down? And only god knows what will happen in May.

[avikz]

The U.S. economy contracted at its fastest rate since the Great Recession.
GDP fell 4.8% in January to March, compared to the previous quarter.
Consumer spending fell sharply.

https://www.weforum.org/agenda/2020/04/the-u-s-economy-contracted-sharply-in-the-first-quarter-of-2020


But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!! 

It's not just US. I belive majority of the countries will have to go through similar kind of situation. Even World Bank has predicted that the world economy growth will be only 2.5% in 2020. So we all have to be prepared for a disastrous time ahead. We will see job losses and less government spending in the upcoming quarters and we will have to live with it.

To get back on track, the economy has to open for business first. Consumer spending will remain low because people won't have money in hand unless they find a suitable job and that's true for every country. Unless the economy opens up for business, the current situation will worsen further.

[Lucius]

But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!!

The consequences of the pandemic have been visible worldwide, some countries have been hit more, some less. The fact that GDP in the USA (population 329 000 millions) fell by 4.8% in Q1 is not something to be surprised at if we consider that EU (population 500 000 million) is drop 3.5%, and eurozone for 3.8%, but countries like Spain lost 5.2% and France 5.8%.

Although lockdown in USA actually started at the end of March, they ban travels to and from EU on 13/14 March, so it may still be more logical to look at things from the date that USA lockdown actually began.

i don't mean to be a downer, but this could go on for years. since there is no vaccine or herd immunity, experts are expecting cases to rise again after reopening---not to mention during the winter flu season. are you gonna feel safe flying in airplanes, eating in restaurants/bars, shopping often? lots of people won't.

Let's say it all depends on how long it will take to produce an effective vaccine, and how long it will take to produce it in adequate quantity, and then distribute it and get all the people in the world vaccinated. But as we know the virus can mutate and the vaccine can become ineffective at any time, as is the case with the vaccines that exist for the common flu. We have the flu vaccine, but the same disease infects about 5 million people a year, and in bad years number of deaths is reach 650 000 by the data from WHO.

[The Sceptical Chymist]

Venues were shutting down, people stopped traveling and going to restaurants and bars, etc. weeks before governors issued lockdown orders. The fear of the pandemic (and the economic impact) is a much larger force than the government orders themselves. GDP growth was already weak heading into all of this too.

Yeah, that would be my guess as to the data as well.  The bars and restaurants and average businesses being closed is only a temporary thing, and my guess is that most businesses will be back up and running relatively soon--and I would expect unemployment claims to drop as well.

The only thing that worries me is that big corporations like Coca-Cola and others that make up the Dow and S&P500 have taken some serious hits to their quarterly profits which have yet to be reported.  The stock market right now looks like it's generally doing OK, but I'm curious to see how the market is going to do the rest of the year and in 2021.  Those stimulus checks probably helped prop up certain asset classes, as I'm sure some people used the money to buy stocks, bitcoin, metals, or whatever.  That was only a temporary measure, however.  I'm kind of expecting either a crash or a major correction in the coming months.

[Snappycoco]

I think they are somehow confident with their health care systems in which they took it for granted til such time they themselves cant stop the effects. Too much confidence leads to a disaster like that and now they are facing much more problems economically. But hey its U.S. the greatest nation in the world. They'll comeback faster than other countries.

[exstasie]

Venues were shutting down, people stopped traveling and going to restaurants and bars, etc. weeks before governors issued lockdown orders. The fear of the pandemic (and the economic impact) is a much larger force than the government orders themselves. GDP growth was already weak heading into all of this too.

Yeah, that would be my guess as to the data as well.  The bars and restaurants and average businesses being closed is only a temporary thing, and my guess is that most businesses will be back up and running relatively soon--and I would expect unemployment claims to drop as well.

I think we got our wires crossed. I'm saying it's not a temporary thing because a large percentage of business closures and productive declines are not due to the government shutdowns themselves but because of the consumer demand shock. Unemployment claims will drop as businesses reopen but I'm confident they will not recover anywhere near previous levels.

China's experience has shown, it's one thing to get the factories running again, but it's quite another to get consumers to spend again. And that's the single most important driver of the economy. Consumers and businesses both burned through their savings and took on debts to weather the storm. Now there is no one spending, meaning all this reopening isn't actually bringing in money for businesses.

China’s Factories Are Back. Its Consumers Aren’t.

The reality of this situation will probably sink in over the next couple months as Q1 earnings and Q2 economic numbers continue to trickle in. For now, people are living under the delusion that this will all be a distant memory very soon.

As far as the stock market goes, I think we might be in a period like November 2008: strong bounce and renewed confidence due to bailouts and bullish recovery projections, but the storm probably isn't really over yet.

[jseverson]

But as we know the virus can mutate and the vaccine can become ineffective at any time, as is the case with the vaccines that exist for the common flu.

Mutation is normal, but as things stand, prospects are looking good for a vaccine:

“Small mutations would be expected with any virus. The emerged mutation in this report appears to reduce binding to ACE2 meaning less virulence which could potentially mean less ability to infect. But as this is an isolated report this doesn’t necessarily mean vaccine attempts are futile.”

I would expect it to be effective, and I agree that its development is probably the only way the global economy can start to recover; spending is going to stall while there is risk of infection regardless of regulations. The problem is that it takes years to develop and roll out vaccines. This one in particular should take a bit less time on average considering the gravity of the situation, but we might still need to brace for a multiple-year wait. In the meantime, most people will continue to spend only when necessary.

I think they are somehow confident with their health care systems in which they took it for granted til such time they themselves cant stop the effects. Too much confidence leads to a disaster like that and now they are facing much more problems economically. But hey its U.S. the greatest nation in the world. They'll comeback faster than other countries.

Lol what health care system? There are a handful of countries that have been doing a lot better, but yeah they should be able to weather this storm better than most despite all the doom and gloom.

[audaciousbeing]

Its not only the US economy that contracted but the world economy and I have not even seen a country that is not affected on the overall scale by the effects of this pandemic. This pandemic have ravaged the entire economy and caught people unaware which then defies all the knowledge and skill everyone has been exposed to about crisis management whether by experience or in business schools around the world.

The only reference we all have was the pandemic outbreak that happened over a century ago but hey the world have made significant progress in development since then which is why I am hope that we are going to get over it very soon to the delight of everyone.

[abhiseshakana]

China's experience has shown, it's one thing to get the factories running again, but it's quite another to get consumers to spend again. And that's the single most important driver of the economy. Consumers and businesses both burned through their savings and took on debts to weather the storm. Now there is no one spending, meaning all this reopening isn't actually bringing in money for businesses.

Not only in China, but all countries will also face production acceleration after the pandemic ends. Especially China, which is the center of world manufacturing. Even though the pandemic ended China did not immediately step on the production gas because demand and supply were not yet normal because other countries took turns exposed to corona.

It is different from other countries which after the pandemic will recover domestic consumption and fulfill domestic supply. China awaits demand from other countries that have emerged from the corona storm.

Demand for live crabs and live lobsters began to increase significantly to China. For freight traffic, almost all Chinese airports can receive goods. This shows that the Chinese consumption market remains reliable. One of my friends in Wuhan said, the traffic had started to get crowded and the restaurant had started to be flooded with people.

[dragon695]

 Although the US has been strongly affected in March, there have been more than 3000 cases before in the United States. it also makes people scared and at home, making spending less. Besides, when investors in the stock realized that the situation was gradually losing control and then they sold off strongly. That has greatly affected the income of investors and funds. Then, businesses lost their capital and began to disorient, which is why GDP was hit hard in Q1. This Q2 will also have similar or worse report boards.

[carter34]

But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!! 

The contraction for me is expected. If we are comparing the European economy to that of US, I don't expect it to be the same. At least I believe America has given more stimulus to there citizens. Also despite there hard hit by the covid-19 so far, they have also been making huge donations to affected countries too. There economy will get back soon on track as the lockdown is easing out.

[sheenshane]

IMO, Obviously there was a fell down on the GDP of the USA during the Q1 however, in those months economy experience fall down mostly for those are the months where people just starting their years trying to minimize expenses because of the holiday season. Though, fell down on the GDP of the USA was drastic but that is due to the pandemic where countries started to implement lockdown. But however, USA was not an exception on this but if we are going to compare it to other countries the USA will still be on top of one of those whose economy is still leading globally.

Rest assure after this pandemic USA might experience slowness in an economic recovery but that will also be applicable to any other country. Who will be the first one to recover may depend on who will lift the lockdown and can manage the spread of the virus in their country.
Just my two sats!