The BEA is scheduled to release the advance estimate for the second quarter GDP on Thursday, as market participates brace for the worst quarterly contraction in US economic activity in decades. The U.S. economy shrank at a 5 percent rate in the first three months of 2020. Economists had forecast a decrease of 9 percent.
Everybody knew it was going to be bad, but the sharp drop in second-quarter GDP was still sobering.
The Bureau of Economic Analysis said on Thursday that the coronavirus pandemic triggered the sharpest contraction of the United States economy ever in the second quarter this year, causing a historic plunge in consumer and business activity. The drop in GDP was more than triple the previous all-time decline of 10 percent in the second quarter of 1958.
This post has been updated to clarify that the BEA calculates GDP using an annualized rate.
MarketWatch highlighted the 34.6% decline in consumer spending, which is the main engine of the economy, as the primary reason for the plunge. Its flash estimate of the year-on-year fall in GDP in the second quarter, at 11.7 per cent, was also the largest on record.
Analysts had expected a slightly smaller contraction of around nine percent from April to June.
Nonresidential private investment, a measure of business spending, plunged 27.0 percent, following a decline of 6.7 percent.
However, personal income soared, thanks in large part to government transfer payments associated with the coronavorus pandemic.
While the quirks of working staying closer to home have seen some strength - including athleisure, running shoes, hiking boots and Netflix subscriptions among them - none of it has been enough to offset a historic corporate shutdown. But state spending increased.
"The extremely export-oriented German economy is likely to suffer all the more", notes DW's Böhme, "as important markets like the U.S., as well as countries like Brazil and India, are not really getting the pandemic under control".
"A third-quarter bounce in GDP is looking more muted as of now, given a resurgence in virus cases that is weighing on economic activity", Farooqi added.
In a separate release, the European Commission's indicator for confidence in the euro-area outlook rose more than economists expected in July, with businesses becoming more upbeat about demand. The housing sector has done well as the economy reopened but many other sectors, especially the labor market, have struggled or stalled.