WASHINGTON (AP) – The US economy collapsed at a record rate in the spring but is set to swing to record growth in the quarter that is just ending.
The Commerce Department reported on Wednesday that the economy’s total output of gross domestic product, goods and services fell by 31.4% in the April-June quarter, a slight change from the 31.7% drop a month earlier.
The new report, the government’s last glance at the second quarter, saw a fall that was more than three times that of the previous record-holder, a 10% drop in the first quarter of 1958 when Dwight Eisenhower was president.
Economists believe that the economy will expand at an annual rate of 30% in the current quarter as businesses have reopened and millions have gone back to work. When he breaks the old record for quarterly GDP growth, there will be a 16.7% increase in the first quarter of 1950 when Harry Truman was president.
The government will not release its GDP report until July 29, just five days before the presidential election.
While President Donald Trump is counting on the economic rebound to convince voters to serve a second term, economists said that any such boom this year is a long-term one.
Economists are predicting that the growth rate will slow down to around 4% in the last three months of this year and may actually go through a recession if Congress fails to pass another stimulus measure or if COVID-19 resurfaces. Some areas of the country, including New York, are in transition.
PNC Financial Services chief economist Gus Faucher said, “There are many potential crises.” “We are still dealing with several significant cuts due to the epidemic.”
He said, apart from the possibility that the Congress would not pass through more stimulus support due to the sharp divide between Democrats and Republicans, and more is needed, there are other threats in the form of uncertainty over the upcoming election.
“All this political uncertainty has the potential to reduce economic growth,” Foucher said.
The Trump administration says solid growth in the coming quarters that will restore all production lost by the epidemic.
So far this year, the economy fell at a rate of 5% in the first quarter, marking the end of a nearly 11-year long economic expansion, the longest in American history. That decline was followed by a second quarter decline of 31.4%, which was initially projected as a decline of 32.9% two months earlier, and then revised up to 31.7% in the previous month.
A slight upward revision in this report projected a reduction in consumer spending. This was still a record decline at a 33.2% rate, but estimates for the previous month were for a decline of 34.1%. This improvement was to some extent offset by a downward revision for exports and trade investment.