GDP shrank by 4.8% during first quarter
Gross domestic product declined by 4.8% during the first quarter of 2020, according to government figures released on Wednesday, confirming that the U.S. economy has likely entered a recession due to shutdowns related to slowing the spread of the novel coronavirus.
The negative Q1 reading is the first decline in GDP since 2014, and it is the most significant drop in economic activity since Q4 of 2008 during the financial crisis, when the economy declined 8.4%.
GDP would have declined more significantly if not for a large increase in governmental spending by federal and state governments. Consumer expenditures, the bulk of total GDP, fell 7.6%, durable goods plunged 16.1%, and expenditures on services dropped 10.2% in the quarter.
The Bureau of Economic Analysis stated in a technical note that the reading may not be accurate, as it will be difficult to quantify the true extent of the damage that the virus has had on the economy.
The coronavirus shutdown "led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified," the bureau said in a statement.
"We believe economic reality during the quarter was even worse," Goldman Sachs economist Spencer Hill said. "Larger than usual revisions to growth data are common in recessions and other periods of high economic volatility."
The news comes as governments around the country are planning to begin reopening parts of their states by relaxing strict social distancing mandates and orders to stay sheltered at home.