UPDATED: First Quarter US GDP Worst Performance Since Great Recession

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Wednesday, April 29, 2020

GoLocalWorcester News Team

January to March was the worst performance by the U.S. economy since the Great Recession.

The Commerce Department released the 1st quarter numbers Wednesday morning at 8:30 AM.

While both January and February were both positive growth months, March numbers collapsed enough for the quarter and the U.S. economy to contract 4.8 percent for January through March.

Economists warn that the worst is yet to come. The second quarter is likely to show a decline of more than 30%. Some analysts predict the GDP for the second quarter will drop between 35 and 40%.

U.S. Secretary of Commerce Wilbur Ross issued the following statement in response to the new report:

"Today’s GDP numbers are weak, but in line with expectations as a result of the COVID-19-driven disruptions to daily lives at home and around the globe that have rocked global markets and supply chains. We continue to have the most resilient economy in the world, driven by innovative and hardworking Americans who have shown that they are willing to make the needed sacrifices to defeat this invisible enemy.

The President has taken bold action to leverage the expertise and resources of the entire Nation in this fight. Congress has confronted the seriousness of this challenge with trillions of dollars in relief funding for those impacted by the virus, establishing a firm footing for a swift and strong American comeback. When this chapter ends, America will be both stronger and healthier than ever because of the President’s decisive and timely actions."

According to the government report:

The decrease in real GDP in the first quarter reflected negative contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, and private inventory investment that were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased (table 2).

The decrease in PCE reflected decreases in services, led by health care, and goods, led by motor vehicles and parts. The decrease in nonresidential fixed investment primarily reflected a decrease in equipment, led by transportation equipment. The decrease in exports primarily reflected a decrease in services, led by travel.

Current‑dollar GDP decreased 3.5 percent, or $191.2 billion, in the first quarter to a level of $21.54 trillion. In the fourth quarter, GDP increased 3.5 percent, or $186.6 billion (tables 1 and 3).

The price index for gross domestic purchases increased 1.6 percent in the first quarter, compared with an increase of 1.4 percent in the fourth quarter (table 4). The PCE price index increased 1.3 percent, compared with an increase of 1.4 percent. Excluding food and energy prices, the PCE price index increased 1.8 percent, compared with an increase of 1.3 percent.

Personal Income and Outlays

Current-dollar personal income increased $95.2 billion in the first quarter, compared with an increase of $144.1 billion in the fourth quarter. The deceleration was more than accounted for by a deceleration in compensation that was partly offset by an acceleration in personal current transfer receipts (table 8).

Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.

Personal outlays decreased $253.5 billion, after increasing $118.8 billion. The decrease was mainly accounted for by a decrease in PCE.

Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.

Source Data for the Advance Estimate

Information on the source data and key assumptions used in the advance estimate is provided in a Technical Note that is posted with the news release on BEA's Web site. A detailed "Key Source Data and Assumptions" file is also posted for each release. For information on updates to GDP, see the "Additional Information" section that follows.

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