The U.S. GDP to fall nearly 53%

By: Miguel A. Rodriguez

09:45, 14 September 2020

The latest report alongside the ones expected for this week's end predicts a GDP drop of almost 53% in Q2

The effects that the pandemic had over the American economy will be present for quite some time. The latest data provided by the Atlanta Federal Reserve shows that due to the virus, the economic activity for the second quarter halved.

The American economy shrank by 5% in the first quarter, which set the ground for Q2 performance and brought the country close to recession.

Following Monday's data regarding the U.S. manufacturing keeping a decreasing position, the GDP will probably fall by nearly 53%, say market analysts familiar with the matter. Because of the money-shortage that people experience nowadays, the personal consumption expenditures, which makes up for 68% of the GDP, is expected to decline between April and June by 58.1%. 

Some surveys and reports conducted by the New York Fed's GDP Nowcast and the CNBC's Rapid Update show a decline in GDP by 35.5%, and 38%, respectively, for Q2 only. On the other side, analysts think that in the third quarter, the recovery will be approximately 20%. For the last quarter, the GDP could increase by 5%. 

The unemployment situation also contributes to the GDP decline. Since the pandemic, more than 40 million people are without a job.  According to Jerome Powell’s estimates, the unemployment rate could go as high as 25% before decreasing. April's report showed a scale unseen since the Great Depression – 14.7%.

Now, all eyes are on Friday’s nonfarm payrolls report, which experts believe will show 8.3 million people who lost their jobs in May, and an unemployment rate of 19.5%.

Overall, the GDP could return to its 2019 records in late 2022.

Despite all the negative data, the American benchmarks continue to grow, and during today's early trading session, USA500 added 0.4%, while USA30 gained 0.7%. TECH100 went up 0.3%. 

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Sources: cnbc.com, markets.businessinsider.com, investing.com


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