Coronavirus: US economy sees fastest contraction in decades

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Food banks have seen an increase in demand

The US economy shrunk at a 32.9% annual rate in the April to June quarter, as the country struggled with spending cuts during the epidemic.

This was the deepest fall as the government began keeping records in 1947 and was three times more severe than the earlier record of 10% set in 1958.

The decline was due to reduced spending on services such as healthcare.

Economists have said that they expect to see the sharpest fall in the second quarter thereafter.

But due to the rise in virus cases in the US and re-banning activity in some areas, the rebound is showing signs of stalling.

More than 1.4 million people filed new claims for unemployment last week, slightly above the first week of the second week. Other data falls into spending cuts and confidence in July.

job losses

Jerome Powell, head of the US central bank, called the recession “the most severe in our lives”, warning of the recession on Wednesday.

He urged further government spending to help American homes and businesses weather the crisis.

The call was echoed by other business leaders on Thursday, according to data brought to focus on the scale of the country’s economic crisis.

“The staggering news of the historic decline of GDP in the second quarter may surprise us all,” said Neil Bradley, chief policy officer at the US Chamber of Commerce, a business lobby group. “This disturbing news should force the Congress to move fast.”

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The International Monetary Fund has predicted that global growth rate will decline by 4.9% this year. On Thursday, Germany posted a record decline of 10.1%, while Mexico’s economy also reported a double-digit contraction.

Compared to the same quarter a year earlier, the US economy contracted 9.5%. Both exports and imports were down more than 20% from a year earlier, while consumer spending – the main driver of the US economy – fell 10.7% year-on-year.

Empty pocket

The US has lost about 15 million jobs since February, despite strong hiring in May and June. The US Census estimates that more than half of American adults live in families that have seen income cuts since the epidemic.

Economists warned that it would take years for the US to recover from the catastrophe.

“Even when the economy saw a rapid boom in May and June, the Kovid-19 economic shock caused so much damage in the earlier months that the net result was an economic catastrophe for the second quarter,” wrote Josh Bivens, director of research at Economic Policy Institute.

“The fact that the initial employment of the second week is worrisome and said there is a risk of newborn consumption declining,” said Madhavi Bokil, vice president of Moody’s Investors Service.

At the Bean Post Pub in New York City, owner Anthony Loporto said he continues to struggle to fill his table and remains concerned about what autumn and winter will bring.

“I don’t believe in quick bounce-backs,” he said. “There is simply not enough money in people’s pockets and not enough in people’s souls.”

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