Topic: The U.S. economy contracted sharply in the first quarter of 2020 (Read 853 times)

I waited for a week before commenting on this and experience on my own how the economy would react once things opened, as in my current country we're almost on the last few restrictions which don't really affect the economy that much.

From the start I was a bit pessimistic, or should I say optimistic about that 40% downturn, I don't think it will come near that.

Here we're experiencing some sort of relaunch and I'm not really sure it's just a dead cat bounce, as it seems like a real start over.
Constructions are back almost at full power, almost all the construction sites in the new neighborhood east of the city are working full time, most of the factories except the ones with cases are working between 75-100%, and it seems that a whole start-up almost at the same time in Europe has managed to keep the logistic chains working without many hiccups.
Of course, there is tourism, but we're relying more on city breaks than full 7-12 days holidays, and most of our tourists are also from the EU, so we won't be suffering like other countries which must convince them to fly 12 hours and not be scared of the thoughts of getting stuck abroad.

The US might be hit harder, but I doubt even with those numbers regarding unemployment that this crisis will be indeed the biggest and worst we have seen in the last centuries. As for the response against the virus, I love how the democrats and other leftist papers in Europe are criticizing Trump but they are so quiet about Sweden, every democrat, when asked what economic/healthcare/policing model should be followed, is pointing to Sweden but this time their fingers are frozen stiff.

 

Easing the lockdown and letting people go back to their job might be a good idea if they are to help their economy rise back. But another bad news is that many people have lost their jobs because of this coronavirus. And apart from that they are having a serious protest (should I really count that in, cause there are other countries doing the same?).

But, I believe when the economy is opened and people starts working again, it’s going to help boost the economy again. It has been this same way for most countries, and a lot of people fear that there will be a recession soon. In my country it’s going to be the issue of food because there is no way to import since borders are closed.

What precautions and limitations are you talking about if people have nothing to eat. Here only if the fence around your house is big to put. But maybe you meant that the states of all countries should get together and make decisions that will save people. Turn to wealthy people in your own country. Are the poor so much worse than the rich that they must starve to death?

Already in the first quarter of 2020, US GDP fell by almost 5%. In addition, many economic experts express their opinion that the US economy has already theoretically reduced by 40%. almost 26 million people applied for unemployment benefits. These are only hypothetical data, which can be even more if real and more detailed calculations are made. but it should be noted that the consequences of quarantine because of the pandemic affected not only the United States, but also other developed countries of the world. according to the UN, more than one and a half billion people will soon be without means of subsistence. I believe that the best way out of this situation is the introduction of other rules and regulations of precautions and restrictions in order not only to save the economy, but also to save people’s life, to give their father-in-law the opportunity to work in all types of business, but under strict state control over compliance with the rules and using individual means protection.

Hoping for the best but preparing for the worst is a wise move. The decision of the White House not to issue projections is one proof that the condition of the American economy is alarming. But in the mirror of American history, America will rise up and with the consideration that the pandemic is prevalent in almost every corner of the world.

https://www.washingtonpost.com/business/2020/05/28/white-house-coronavirus-economic-projections/

Due to Corona, which spread to 215 countries, many countries made a total travel ban and border shutdown. While the majority imposes a partial travel ban and border shutdown. The level of anxiety over a pandemic is the greatest compared to the period of the financial crisis that has happened several times. Capital owners withdraw their capital and move it to safer assets such as gold and dollars.

So, demand decreases, investment decreases, unemployment increases, budget deficits. But neither the state nor the public will remain silent seeing this condition. The majority will do what they can to move, either with the profit or humanitarian motives. Vaccines are indeed the only solution to overcome the pandemic and to break the lethal effects of the corona pandemic in the economic sector, but even if the vaccine is limited to expectations, humans will not give up.

There is nothing wrong in having an optimistic view about the situation but when you say that when the virus situation is sorted everything will be back to normal and figmentofmyass just explained how long will it take to have a vaccine and the economy is crumbling and the jobless people are rising and it will not be back to normal just like that. The real damage will be known in the next two years, right now what we know is the situation is really bad but we are yet to understand the extend of the damage.

All right then we'll all go back 20 years and then another Hitler will be born and reshape Europe. Is that what you wanted to read here? I'm just trying to be a little optimistic at the time when every site is filled with information noise and news shit.

the most optimistic estimate for a widely produced and safe vaccine = 1.5 years. and that would be record-shattering for vaccine development so let's not get our hopes up too much. 5+ years is the typical development cycle, and sometimes (as with the SARS coronavirus) no vaccine is ever successfully developed.

the economic damage is quickly surpassing 2008. maybe this recession will end up somewhere between 2008 and the great depression.

Yes tourism also trade with China. China was locked down already in February. Also another thing. California that is by far biggest USA economy, had virus and businesses closed even before Europe in early March. Same as Washington state. So it sort of makes sense now.

The Trump administration, desperate to improve the economic outlook, is giving up on defeating the corona virus: https://www.cnn.com/2020/05/06/politics/coronavirus-task-force-trump-pence/index.html


I assume they will continue thwarting testing efforts because of how bad the numbers look, and will look in the future. The White House projection for death counts has nearly doubled recently and will likely worsen again with reopening. Mitigation and containment obviously failed, cases are still rising and will rise more after reopening, so I believe eventually governors will begin shutting states down again as the health care system gets overrun.

This is all building up to an eventual brutal crash in the stock markets when that next wave of shutdowns occurs.

I'm not saying that it is not necessary to develop vaccines to treat people and to support them. I'm saying that getting out of the current situation will be faster than trying to get out of the great depression or 2008.
As soon as they find a fully working 100% method of vaccination, the world will come to life again and everything will be as before in just a year and a half.
Anyway, investors think that even without vaccines economy will start to recover in  2021 Q1

There is also an increase nowadays which could be understood as the recovery. There was obviously a fall and we couldn't expect anything else honestly. Think about it the pandemic happened and people were stuck at home, what were you expecting them to do? Go out and spend money? There is no way to earn money or spend money right now if you are expandable and there was a lot of people who were expandable for a job, sure you are needed to grow and get bigger, but to survive you weren't needed, to survive only a handful of people is enough for many places.

So, this was an expected drop. It doesn't mean that the system works, system doesn't work and it showed us a lot of times before, only a decade ago or so we were in another drop, but just because the system is crooked for the wealthy and it doesn't work for us doesn't mean that this wasn't expected.

America's biggest mistake is to underestimate the corona virus, so it's no wonder the spread of the corona virus in America is the worst.
This is caused lockdown late, so I am not surprised that the economy in America has fallen victim. The first quarter of 2020 is very bad
for America, But the second quarter would be far worse for America if a vaccine was not found to stop the spread of the corona virus.
Hopefully a miracle happens, because America needs it now.

No one is expecting this virus to spread so fast around the world and I know that most of the countries here aren't ready and unplanned. That's the most crucial problem in this pandemic, economies are crashing because of the sudden effect of this virus to the world. Everyone's struggling especially that the US are a large country and the number of infected is still increasing and they are already in 1 million+ cases. This lockdown is really helpful and at the same time bad when it comes to economy. It slower the rate of transmission but the economy is not moving properly and having a hard time to grow. GDP will not drop as long as the government also prioritize their economy and execute some effective ways to handle it.

We live in a global economy now, so even if the USA had no lockdown, other countries trading with them, would have had a lockdown and their trade with the USA would have gone down. I am specifically thinking of the closure of the International borders and the influence that the tourism income would have had, with almost zero tourist being allowed to visit other countries.

Imports and Exports will also suffer now, because some industries and companies in other countries are closed for business, so they are not manufacturing goods for exports. So let's say a company in the USA are building cars and they import some of the parts from another country, then their production are also halted, because those industries are under lockdown in another country.

The USA will take a lot more damage for a much longer time, because they are the worst affected country in the world. (1.23 million infections and 72 000 deaths) <---- A lot of people will avoid traveling to the USA for this reason alone. 

Since the USA went on lockdown very late, I think that's the reason why their GDP fell that much. Before they impose lockdown, the virus was already spreading and they are being affected already. Travel ban and their tourism I think was already affected even before the lockdown. It makes it even worse for them because the government didn't make an early action about this problem. The virus began last year, no wonder why even without the lockdown it already affected the GDP of the US and its economy.

2nd quarter will even be harder for them. Not only the USA but for every country affected by the virus. 2nd quarter of the year yet there is still no vaccine available, it means the longer this lockdown will last, the more the economy will be affected badly.

They are really having a hard time controlling their stock market, their economy and as well as the virus. US really needs to have a prior plan so that they can recover one step at a time, they are experiencing issues simultaneously and I believe that their leader are panicking because of a huge number of cases in their country. They think that they are really strong and healthy enough to fight the virus that's why they underestimated the tragedy brought by the Covid-19. The reason why their economy is contracted sharply right now is because the government is focusing and allocating their funds on the hospitals and making people recover from the virus. Hopefully they can recover from their GDP so that their issue about their economy will become lessen.

Trump's remarks about Lysol's disinfectant injection at the daily briefing forum on the development of COVID-19 in America, became the subject of discussion in Indonesia that the American President had lost his mind. Many trump statements are considered humorous, such as inserting extracts of light into human skin, which are deemed inappropriate by a president of a world superpower.

Trump is a combination of economist and nationalist, now he needs something to bring him elected the second time but the corona pandemic becomes a stumbling block. Just hope that the choice made by Trump is not an economist at war which is Trump's expertise.

that's what is weighing on my mind. people don't seem to understand that businesses shutting down for months can completely destroy them---this has a systemic effect on supply chains and layoffs/oversupply of labor.

a recent survey of small businesses shows:



that is staggering and quite scary. without bailouts, half of all small businesses would go bankrupt after "a few months" or less. it's already been 2 months!

and less than half of business owners applied for the SBA relief loans, not all would be approved, and even for those who are, this is the truth:


everyone is talking like we can just "reopen" as if that means flipping on a light switch, and magically we will return to the q4 2019 economy. even if we ignore the waves of bankruptcies that are likely coming, business owners see the writing on the wall re consumer spending:

It shows that the economy was struggling well before the lock down and for many countries the corona virus will be used as an excuse when there is an election, many business are shut down during this period and it will show in the next quarter and it will be terrible. The elections are coming up and Donal Trump will be having a tough time convincing the voters.

Lots of domestic businesses were effectively shut down plus factories exporting goods are also affected, too. 4.8% IMO is still a generous drop considering the amount of affected people in the US plus the increased government spending towards the aid for their citizens. Imagine the US is a big country with tons of gears working to produce goods to sell. If 80% of those goods were to shut down, plus most of the goods that they are selling isn't part of something that people need during these times, economy would surely drop. It was a massive domino effect that led to this sharp drop, and it is hurting not only the US but also the whole world.

In general, the global economy is experiencing a huge drop in 2020, and the Coronavirus pandemic is too large, and it has discovered heterogeneous production cycles in which components from different countries are present, such as many electronics products.

See this is why people warned about Trump being the leader.
When people were focusing on improving the facilities and making the nation stronger , he was focusing on building walls and apparently Making America Great Again !
This is so wrong , in the name of nationalism the man did many unspeakable things .
He did not have enough achievements to actually get the government going , plus he is asking help from Ukraine now when at times he called them foolish .
I do not know what else we could have expected because he was the governing body .

I am not pessimistic in nature, but I do not like the current situation where governments only focus the public on the current situation and generally avoid talking about the long-term consequences. I am not just talking about an economy that has been hit hard, but also about people who are social by its very nature. Living in isolation for months is difficult, and I know it best because I spent my childhood in the basements hiding from those who invaded my country and bombed it with all possible weapons, so this home isolation is not too much of a problem for me. What I'm saying (and also from personal experience) is that everything that happens will have psychological effects on people, the old way of life has to change.

Reading the various economic analyzes, it is concluded that many countries have actually calculated when and how they will carry out the lockdown, because the goal was for everyone to have a shorter duration of that period. All of that for the purpose that national economy is destroyed as little as possible, because if you close hair salons, restaurants, all the shops (except food shops), schools, colleges, public transport, literally you cut the branch you're sitting on. That's why all countries are in a hurry to get back to normal - but of course with a lot of restrictions that should ensure that the virus spreads as little as possible.

IMO, Obviously there was a fell down on the GDP of the USA during the Q1 however, in those months economy experience fall down mostly for those are the months where people just starting their years trying to minimize expenses because of the holiday season. Though, fell down on the GDP of the USA was drastic but that is due to the pandemic where countries started to implement lockdown. But however, USA was not an exception on this but if we are going to compare it to other countries the USA will still be on top of one of those whose economy is still leading globally.

Rest assure after this pandemic USA might experience slowness in an economic recovery but that will also be applicable to any other country. Who will be the first one to recover may depend on who will lift the lockdown and can manage the spread of the virus in their country.
Just my two sats!

The contraction for me is expected. If we are comparing the European economy to that of US, I don't expect it to be the same. At least I believe America has given more stimulus to there citizens. Also despite there hard hit by the covid-19 so far, they have also been making huge donations to affected countries too. There economy will get back soon on track as the lockdown is easing out.

 Although the US has been strongly affected in March, there have been more than 3000 cases before in the United States. it also makes people scared and at home, making spending less. Besides, when investors in the stock realized that the situation was gradually losing control and then they sold off strongly. That has greatly affected the income of investors and funds. Then, businesses lost their capital and began to disorient, which is why GDP was hit hard in Q1. This Q2 will also have similar or worse report boards.

Not only in China, but all countries will also face production acceleration after the pandemic ends. Especially China, which is the center of world manufacturing. Even though the pandemic ended China did not immediately step on the production gas because demand and supply were not yet normal because other countries took turns exposed to corona.

It is different from other countries which after the pandemic will recover domestic consumption and fulfill domestic supply. China awaits demand from other countries that have emerged from the corona storm.

Demand for live crabs and live lobsters began to increase significantly to China. For freight traffic, almost all Chinese airports can receive goods. This shows that the Chinese consumption market remains reliable. One of my friends in Wuhan said, the traffic had started to get crowded and the restaurant had started to be flooded with people.

Its not only the US economy that contracted but the world economy and I have not even seen a country that is not affected on the overall scale by the effects of this pandemic. This pandemic have ravaged the entire economy and caught people unaware which then defies all the knowledge and skill everyone has been exposed to about crisis management whether by experience or in business schools around the world.

The only reference we all have was the pandemic outbreak that happened over a century ago but hey the world have made significant progress in development since then which is why I am hope that we are going to get over it very soon to the delight of everyone.

Mutation is normal, but as things stand, prospects are looking good for a vaccine:


Lol what health care system? There are a handful of countries that have been doing a lot better, but yeah they should be able to weather this storm better than most despite all the doom and gloom.

I think we got our wires crossed. I'm saying it's not a temporary thing because a large percentage of business closures and productive declines are not due to the government shutdowns themselves but because of the consumer demand shock. Unemployment claims will drop as businesses reopen but I'm confident they will not recover anywhere near previous levels.

China's experience has shown, it's one thing to get the factories running again, but it's quite another to get consumers to spend again. And that's the single most important driver of the economy. Consumers and businesses both burned through their savings and took on debts to weather the storm. Now there is no one spending, meaning all this reopening isn't actually bringing in money for businesses.

China’s Factories Are Back. Its Consumers Aren’t.

The reality of this situation will probably sink in over the next couple months as Q1 earnings and Q2 economic numbers continue to trickle in. For now, people are living under the delusion that this will all be a distant memory very soon.

As far as the stock market goes, I think we might be in a period like November 2008: strong bounce and renewed confidence due to bailouts and bullish recovery projections, but the storm probably isn't really over yet.

I think they are somehow confident with their health care systems in which they took it for granted til such time they themselves cant stop the effects. Too much confidence leads to a disaster like that and now they are facing much more problems economically. But hey its U.S. the greatest nation in the world. They'll comeback faster than other countries.

Yeah, that would be my guess as to the data as well.  The bars and restaurants and average businesses being closed is only a temporary thing, and my guess is that most businesses will be back up and running relatively soon--and I would expect unemployment claims to drop as well.

The only thing that worries me is that big corporations like Coca-Cola and others that make up the Dow and S&P500 have taken some serious hits to their quarterly profits which have yet to be reported.  The stock market right now looks like it's generally doing OK, but I'm curious to see how the market is going to do the rest of the year and in 2021.  Those stimulus checks probably helped prop up certain asset classes, as I'm sure some people used the money to buy stocks, bitcoin, metals, or whatever.  That was only a temporary measure, however.  I'm kind of expecting either a crash or a major correction in the coming months.

The consequences of the pandemic have been visible worldwide, some countries have been hit more, some less. The fact that GDP in the USA (population 329 000 millions) fell by 4.8% in Q1 is not something to be surprised at if we consider that EU (population 500 000 million) is drop 3.5%, and eurozone for 3.8%, but countries like Spain lost 5.2% and France 5.8%.

Although lockdown in USA actually started at the end of March, they ban travels to and from EU on 13/14 March, so it may still be more logical to look at things from the date that USA lockdown actually began.

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Let's say it all depends on how long it will take to produce an effective vaccine, and how long it will take to produce it in adequate quantity, and then distribute it and get all the people in the world vaccinated. But as we know the virus can mutate and the vaccine can become ineffective at any time, as is the case with the vaccines that exist for the common flu. We have the flu vaccine, but the same disease infects about 5 million people a year, and in bad years number of deaths is reach 650 000 by the data from WHO.

It's not just US. I belive majority of the countries will have to go through similar kind of situation. Even World Bank has predicted that the world economy growth will be only 2.5% in 2020. So we all have to be prepared for a disastrous time ahead. We will see job losses and less government spending in the upcoming quarters and we will have to live with it.

To get back on track, the economy has to open for business first. Consumer spending will remain low because people won't have money in hand unless they find a suitable job and that's true for every country. Unless the economy opens up for business, the current situation will worsen further.

Yes it is but in USA it only happened in few weeks of March. January and February were normal months.  I am not overeating. If few March weeks had such impact on GDP how will have April total lock down? And only god knows what will happen in May.

i don't mean to be a downer, but this could go on for years. since there is no vaccine or herd immunity, experts are expecting cases to rise again after reopening---not to mention during the winter flu season. are you gonna feel safe flying in airplanes, eating in restaurants/bars, shopping often? lots of people won't.

and then you have the economic damage: so many people will be broke (and unemployed) after this, not spending money. as abhiseshakana points out, consumer spending is vital to the american economy. it accounts for something like 70% of all economic activity.

without a miracle treatment/vaccine, i don't see a quick recovery happening.

Keep in mind, consumer activity is the cornerstone of the economy in the United States. The contraction was experienced because the efforts made to stem the spread of the coronavirus have forced many companies in the US to close and consumers not to leave their homes. The decline in the first quarter was led by the sharpest decline in consumer spending triggered by encouraging consumer actions to practice social distancing restrictions and a number of places that used to be a means of interaction such as restaurants, schools and workplaces have been closed to suppress the spread of the coronavirus.

Severe contractions are also a domino effect of the global slowdown due to a pandemic. The economic indicators that have been hit are falling demand, falling oil prices, increasing unemployment.

Economic growth in Q1 was still helped because from January to February there was a recovery momentum from 2019, consumption, investment, and even exports showed positive developments. Even consumption until March the first week is still good. The situation in the second quarter of 2020 will be different. Consumption, investment, and exports will be affected because the World Health Organization (WHO) has announced the coronavirus as a global pandemic.

We will see bigger drops soon. But everything will be fine in the next year, market is always recovering

I think you're overreacting. The drop in GDP is due to the closure of most shops, air transport and tourism.
Yes, there will be drawdowns in the economy and they will be quite noticeable. But how quickly it all started - so quickly everything will recover, I believe. Those who have survived-will open their doors again everything will be fine. This is a crisis but in contrast to the 2008 crisis. it is caused by external factors and not by the madness in the derivatives market.
Everything will be fine, we just need to wait

The process of country economic recovery for America will be very expensive and they dont care what it will cost the Government. They understand how important it is to start early even without containing the spread of the virus. The clause to the available business loan should absorb a large number of unemployed citizen in short while but the inflation is lightly spoken about, which I think may be devastating on the long term. It is important that the government open the borders early for export, import and other migration process.

Venues were shutting down, people stopped traveling and going to restaurants and bars, etc. weeks before governors issued lockdown orders. The fear of the pandemic (and the economic impact) is a much larger force than the government orders themselves. GDP growth was already weak heading into all of this too.

Q2 numbers will probably be brutal, yes. Most estimates are in the 40%+ contraction range. Somehow, there is still optimism for a V-shaped recovery in the second half of the year. I am not convinced of that myself.

Well to prevent the Q2 GDP from being worse they need to open the economy first. Hence why they are slowly trying this now with different states. Most likely they will see if the curve stays flattens and if it does other states will follow. However if it fails and the open states get an exponential increase of cases then obviously everything will be locked down again.

The USA closed later because the planes were banned to and from China and trump assumed this would be enough. However I think the people who were travelling from Iran and Italy were the ones that brought it into areas such as Washington and New York and made a huge impact.

Things are looking very bad and hence why we need that vaccine as soon as possible.

The U.S. economy contracted at its fastest rate since the Great Recession.
GDP fell 4.8% in January to March, compared to the previous quarter.
Consumer spending fell sharply.

https://www.weforum.org/agenda/2020/04/the-u-s-economy-contracted-sharply-in-the-first-quarter-of-2020


But I dont understand why so much. USA went in lockdown only at end of March.  Europe started around 10th March. USA was at least 10 days latter. How can GDP drop almost 5% when Jan and Feb were positive?  How can be the 2020 predictions for USA around 5%?  Q2 GDP drop will be catastrophic!!!