On 30th July 30, 2020, the Bureau of Economic Analysis (BEA) under the Department of Commerce of the United States reported that the US economy has shrunk at a record annual rate of 32.9% in the second quarter (Q2) (1st April to 30th June) of 2020 as the country has witnessed lockdowns and spent cutbacks during the COVID-19 pandemic crisis.
This drop in the Gross Domestic Product (GDP) is triple the previous all-time decline of 10% in the Q2 of 1958. With 44, 95,014 cases of virus infections and 1, 52,070 deaths in the US, the COVID-19 crisis has led to the steepest decline in the US economy since the Great Depression.
From the bar graph, it is evident that Q2 of FY20 (financial year) has noted a decrease in the real GDP at an annual rate of 32.9%. And from the advance estimates of the BEA released, it is also evident that the GDP growth rate in Q1 of 2020 has decreased by 5%.
The GDP growth rate in the Q2 of the present financial year 2020 fell 9.5% due to the fallout of economic output from the coronavirus pandemic. The deadly virus not only made a health emergency in the nation, but ravaged the businesses that are being shut down to contain the virus.
Further, consumer spending by the general public has declined due to the stay-at-home orders for several weeks by some of the States in the nation where virus has been causing emergency heath crisis. The loss of jobs and holding of household savings by families has further aggravated the situation.
Bar Graph: Fall of 9.5% GDP in the Second Quarter of 2020
With increase in cases across the US and the failure to contain the virus in some of the key cities, the country is experiencing a drastic decrease in consumer spending, job losses and business shutdowns, thereby witnessing a decline in the GDP growth rate and US’ dominance around the world in currency and geo-political power.
— CNN (@CNN) July 30, 2020
Though the economic activities of the US economy have started to pick up since May, resurgence of new COVID-19 cases has further deteriorated business activities. When people in hard-hit areas including the South and West regions of the US were ordered to stay at home, while some voluntarily shut down their businesses to control the spread of the virus, many of the conservative groups supported by Trump claimed that the virus is a hoax. They said that people need not worry about the severity of the public health crisis, thereby increasing the number of coronavirus cases across the nation.
Further, Reuters reported that,
“The outlook is not very good. Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction.”
With the economic condition on red alert, the White House and the Congress soon have to agree upon the stimulus package bill to help out businesses that are shut due to the outbreak. With a rise in the unemployment claim benefits of over $1.434 million in the week ending on 25th July, the Senate (Republican-controlled) and the White House (Trump-controlled) should agree upon an express stimulus package aid that would save lives of millions from the present economic and health crisis.