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US economy likely suffered historic plunge in Q2

Published : Friday, 31 July, 2020 at 12:00 AM  Count : 92

WASHINGTON, July 30: The US economy likely contracted at its steepest pace since the Great Depression in the second quarter as the COVID-19 pandemic destroyed consumer and business spending, potentially wiping out more than five years of growth.
The bulk of the historic plunge in gross domestic product expected to be reported by the Commerce Department on Thursday occurred in April when activity almost ground to an abrupt halt after restaurants, bars and factories among others were shuttered in mid-March to slow the spread of coronavirus.
Though activity picked up starting in May, momentum has slowed amid a resurgence in new cases of the illness, especially in the densely populated South and West regions where authorities in hard-hit areas are closing businesses again or pausing reopenings. That has tempered hopes of a sharp rebound in growth in the third quarter.
Federal Reserve Chair Jerome Powell on Wednesday acknowledged the slowdown in activity. The US central bank kept interest rates near zero and pledged to continue pumping money into the economy.
"The bottom fell out of the economy in the second quarter," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. "The outlook is not very good. Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction."
Gross domestic product probably collapsed at a 34.1per cent annualized rate last quarter, according to a Reuters survey of economists. That would be the deepest decline in output since the government started keeping records in 1947.
    -Reuters









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