United States: Q2 2020 Marks the Single Worst Economic Quarter on Record

(2 August 2020)  Last week the US economy experienced its deepest single-quarter decrease since the government began tracking this data in 1947. The 32.9% plunge in Q2 dwarfed the 5% decrease in Q1 2020 and the previous record single-quarter decrease of 8.4% in Q4 2008 during the global financial crisis.

• The contraction was widespread, emanating from reductions in consumer spending, exports, inventories, investment, and spending by state and local governments.
• Among the economy's loss leaders were consumer spending, the economy’s usual engine of growth, which contracted by 34.6%, and gross private investment, which contracted by 49%. Within private investment, residential spending contracted the most (38.7%) but is expected to rebound based on new record low mortgage rates.
• Government spending was a mixed bag. Federal spending was up 17%, as the government injected money into businesses, households and the labor market to bolster the economy. State and local government spending, however, was down by 5.6%.

The economic outlook is as certain as is the trajectory of COVID, a stress point for the Trump Administration as the US closes in on the November 2020 general elections. Aiding recovery is the US Federal Reserves’ pledge to keep interest rates at or near zero, however, the path to recovery is still largely dependent on successful containment and economic strategies around COVID.