US GDP plummeted 31.4 per cent in the three months to July to the lowest level on record, data revealed today, as President Donald Trump scrambles to restore the economy ahead of the presidential election next month.
Annualised figures released today by the US Bureau of Economic Analysis (BEA) revised up an earlier estimate which set the GDP drop for the quarter at 32.9 per cent.
The markup settled the figure slightly above the market expectation of a 31.7 per cent drop.
The annualised rate shows a projection of what the full-year outlook would be if the American economy experienced a full financial calendar similar to the last few months.
In a statement, the US government agency said: “The upward revision with the third estimate primarily reflected an upward revision to personal consumption expenditures (PCE) that was partly offset by downward revisions to exports and to nonresidential fixed investment.”
The huge contraction in GDP was largely driven by a collapse in consumer spending and private sector investment.
Current-dollar GDP decreased 32.8 per cent — or $2.04 trillion (£1.59 trillion) — in the second quarter to $19.52 trillion, as the US grappled with the economic effects of suffering the worst coronavirus death toll in the world.
The plunge marked a sharp drop from the first quarter of 2020, where GDP fell 3.4 per cent, and cemented the quarter as the worst period on record for the US economy.
The fresh data, which present the US government’s final revision of the second quarter, showed a GDP decline almost four times larger than the previous record-holder of a 10 per cent slump in the first quarter of 1958, when Dwight Eisenhower was President.
The road to recovery
However, the BEA also said the US economy is set to expand at an annualised rate of 30 per cent in the current quarter, as businesses begin to emerge from months of lockdown.
The projection, if realised, will tear up the current record for quarterly GDP increase of 16.7 per cent in the first quarter of 1950.
The BEA said the decline in second quarter GDP “reflected the response to Covid-19, as ‘stay-at-home’ orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses”.
It comes as the incumbent President Donald Trump and presidential hopeful Joe Biden took to the stage in Cleveland, Ohio last night for the first of three official debates ahead of next month’s election.
Trump is poised to rely heavily on hopes for an economic rebound in his bid for reelection, with July to September quarterly GDP figures set to be released on 29 October, just five days before Americans head to the polls.
Economists have urged the US Congress to pump another round of financial stimulus into the economy, warning that hopes for a V-shaped recovery could be dashed if businesses feel the effects of a second wave of coronavirus spreading across the country.
The US has recorded the worst coronavirus death toll of any country in the world, with almost 1000 fatalities a day taking the country’s total death count to 206,000 out of more than 7.22m confirmed cases.