The US economy plunged in the second quarter, but it’s expected to rebound in the quarter that is just ending.
On Wednesday, the Commerce Department reported the US’s GDP, its economy’s total output of goods and services, dropped at a 31.4% rate in the April-June quarter. It slightly varied from the estimated drop of 31.7% one month ago.
In the new report, the government’s last look at the second quarter showed a more than three times larger drop than the previous record-holder. The previous record was 10% in the first quarter of 1958 when Dwight Eisenhower was the president.
However, economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses reopen and people go back to work. That would shatter the old record for quarterly GDP rise, of 16.7% drop in Q1 of 1950 when Harry Truman was the president.
The government will not release its July-September GDP report until Oct.29, just before the presidential election.
President Trump is counting on an economic rebound to convince voters to elect him for a second term. But economists say such a bounce-back this year is a longshot.
What do Economists Predict?
Economists predict economic growth will slow significantly in the final three months of this year to a rate of about 4%. They say it could topple back into recession if the Congress fails to pass another stimulus measure or the COVID-19 infections are resurgent.
Right now, upticks are occurring in some regions of the country – including New York.
According to Gus Faucher, many pitfalls exist out there. And the US was still experiencing several and significant reductions because of the pandemic. Faucher is a chief economist at the PNC Financial Services.
Faucher said there was a possibility that the Congress would not pass further stimulus support. That is due to a sharp split between Republicans and Democrats over how much is needed. Other threats, such as uncertainty over the upcoming election, also exist. The political uncertainty could outweigh the economic growth.
President Trump’s administration says that substantial growth in the coming quarters will restore all the output lost during the pandemic.
The economy dropped at a rate of 5% in the first quarter. It signaled an end to a nearly 11-year-long economic expansion – the longest in US history. The second-quarter decline followed at the rate of 31.4% – initially estimated two months ago at the rate of 32.9%, then revised to 31.7% last month.
The slight upward revision in the report reflected a less plunge in consumer spending than earlier estimation. It was still a record fall at the rate of 33.2%. But last month’s projections were for a decline of 34.1%. The downward revision to exports and business investment somewhat offset the improvement.
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