US GDP suffers biggest decline since Great Recession as coronavirus batters economy

America’s longest economic expansion is now over as analysts predict the worst is yet to come

The US economy has continued to fall into one of the worst recessions in modern American history, according to the Commerce Department’s latest report, which showed a 4.8 per cent decline in gross domestic product (GDP).

The first quarter earnings reflect a historic decline in economic output from January through March, as the coronavirus pandemic triggered businesses to close and governors to implement stay-at-home orders across the country.

The loss in GDP marked the first economic contraction in the US in six years, as well as the steepest quarterly downturn since the Great Recession.

America’s longest economic expansion in its history has now ended, as analysts predicted the second quarter report expected to come in July would also provide a grim analysis of the pandemic’s impact.

Forecasters said the drop in the January-March quarter will be only a precursor of a far grimmer GDP report to come on the current April-June period, with business shutdowns and layoffs striking with devastating force. The Congressional Budget Office has estimated that GDP will plunge this quarter at a 40 per cent annual rate.

That would be, by a breathtaking margin, the bleakest quarter since such records were first compiled in 1947. It would be four times the size of the worst quarterly contraction on record set in 1958.

In just a few weeks, businesses across the country have shutdown and laid off tens of millions of workers. Factories and stores are shuttered. Home sales are falling. Households are slashing spending. Consumer confidence is sinking.

As the economy slides into what looks like a severe recession, some economists are holding out hope that a recovery will arrive quickly and robustly once the health crisis has been solved – what some call a V-shaped recovery.

Increasingly, though, analysts said they think the economy will struggle to regain its momentum even after the viral outbreak has subsided.

Many Americans, they suggest, could remain too fearful to travel, shop at stores or visit restaurants or movie theatres anywhere near as much as they used to.

In addition, local and state officials may continue to limit, for health reasons, how many people may congregate in such places at any one time, thereby making it difficult for many businesses to survive. It’s why some economists said the damage from the downturn could persist far longer than some may assume.

There is also fear that the coronavirus could flare up again after the economy is reopened, forcing businesses to shutdown again.

The Trump administration has taken a rosier view. The president told reporters this week that he expected a “big rise” in GDP in the third quarter, followed by an “incredible fourth quarter, and you’re going to have an incredible next year”.

The president is building his re-election campaign on the argument that he built a powerful economy over the past three years and can do so again after the health crisis has been resolved.

The Associated Press contributed to this report