U.S. gross domestic product—the total value of all the goods and services produced by the economy—fell at an annual rate of nearly 33% in the second quarter, the biggest annualized drop in history, but that statistic doesn’t tell the whole story. Here’s a better way to think about it.
The shocking 33% number assumes that the rate of economic contraction in the United States continues unchanged for the rest of the year—that won’t be the case because the country has partially reopened and is unlikely to repeat the near nationwide coronavirus lock-down of the second quarter.
The change in GDP from the first quarter to the second quarter was 9.5%, a much more accurate—and still dire—representation of what has changed in the economy over the last several months.
The Commerce Department said the decline was fueled by drops in personal consumption, exports, and spending by state and local governments, among other factors.
A bump in federal government spending—likely thanks to CARES Act rescue provisions—helped to offset some of the damage.
The second quarter also saw a soaring personal savings rate (the amount saved as a percentage of disposable income) of 25.7% compared with 9.5% in the first quarter.
The dismal economic data comes as lawmakers in Washington struggle to come to an agreement over what the next round of federal coronavirus aid should look like as key benefits provided by the CARES Act, like an eviction moratorium for certain renters and supplemental federal unemployment benefits, are expiring. An alarming surge in new Covid-19 cases and deaths across the country is also adding to the pressure. On Wednesday, Florida and California both set new single-day records for virus fatalities.
Within minutes of the data’s release on Thursday morning, President Trump on Twitter suggested that the November election be delayed because of the risk of fraud that he said would accompany mail-in voting (though he provided no evidence of that risk).
Some experts suggested the tweet was intended to distract from the discouraging data.