The U.S. economy contracted sharply in the first quarter of 2020

Marquis

New member
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...ntracted-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!!!
 

Erick

New member
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...ntracted-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!!!
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.
 

Rafael

New member
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!!!
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.
 

Kyle

New member
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.
 

Phoenix

New member
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
 

Jorge

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

Josue

New member
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.
 

Damien

New member
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
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.
Sad
 

Kairo

New member
I think you're overreacting. The drop in GDP is due to the closure of most shops, air transport and tourism
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.
 

Cruz

New member
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...ntracted-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!!!
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.
 

Lane

New member
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!!!
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.

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.
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.
 

Daxton

New member
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.
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.
 

Martin

New member
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.
 

Dante

New member
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.
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.
 

Cristian

New member
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.
 

Colin

New member
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.
 
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