America is still unable to develop a national strategy against the pandemic, which is why the virus is moving from one state to another.
Real American GDP fell by 32.9 percent in the second quarter of 2020 relative to the previous quarter in terms of annual rates. This is the record drop in us GDP for a quarter since 1947 when the US government began collecting such statistics.
The previous anti-record dates back to the first quarter of 1958, when the economy shrank by ten percent on an annual basis, meaning the current figure exceeded it by more than three times.
The economic meltdown in the United States
The US GDP in the second quarter of 2020 declined by 32.9 percent on an annual basis вЂ” that is, this would be a fall if this rate was reduced throughout the year.
In terms of a more familiar methodology, US GDP fell by an estimated 9.5 percent in the second quarter.
The published figure was slightly better than expected вЂ” the consensus forecast of experts polled by Reuters and Bloomberg was minus 34.5 percent.
Consumption declined the most-by 34.6 percent year-on-year, including in the service sector-by 43.5 percent.
Capex was cut by 27 percent and housing investment by 40 percent (but this figure shows a rapid recovery in demand).
Exports fell by 64 percent and imports by 53 percent (but the trade balance was positive).
Government spending rose 2.7 percent.
This economic decline was caused by the deliberate decision of the US authorities to suspend part of economic activity against the background of the coronavirus pandemic.
The slump in the first half of the year wiped out all US economic growth since 2015. In other words, GDP has fallen back to the level of more than five years ago.
British consulting company Capital Economics believes that it takes years to fully compensate for the damage, but notes that business activity indicators point to strong growth at the end of the third quarter вЂ” on an annual basis, it may exceed 20 percent.
However, outbreaks are spreading in at least 21 States, and the recovery of high вЂ” frequency indicators of economic activity вЂ” such as credit card payments and hotel occupancy rates-is slowing.
This will add to the damage already done to income, consumption, investment, and unemployment writes the global intelligence company Stratfor, which is called the shadow CIA.
The historical price of gold
Even moderate measures to contain the pandemic, such as social distance and remote work for a number of professions and industries, still make a significant negative contribution to the economy.
Stratfor listed the reasons why the recovery of the US economy remains in question:
Personal consumption accounts for two-thirds of US GDP, but households will spend primarily on basic needs.
Personal income increased by a third in the second quarter, mainly due to government payments, but people are in no hurry to spend them for fear of new outbreaks and worsening unemployment.
Unemployment remains the biggest drag on the US economy. The number of initial applications for unemployment benefits in the last reporting period increased for the first time after a rapid jump in March.
In the second quarter, fixed asset investment declined 27 percent year-on-year, while real estate investment fell 38.7 percent.
Investment in non-residential buildings and structures has fallen for five consecutive quarters with no prospect of a significant recovery this year.
Trade prospects remain uncertain amid a sharp drop in global demand and heightened tensions between the US and China.
Last week, Americans filed 1.4 million new applications for unemployment benefits. This was the 19th week in a row when more than a million new applications were received, the newspaper Die Zeit notes.
вЂњIn these weeks, the States are experiencing no less than an economic disaster... the US is still unable to develop a national strategy against the pandemic, which is why the virus is moving from one state to another and has already killed 157 thousand Americans; the medical disaster continues almost unchecked,вЂќ the newspaper emphasizes.
Democratic senators may propose a three-trillion-dollar package of measures and quickly passed it through The house of representatives, where they have a majority.
However, the Republican party responded to this proposal only last week. They reduced the size of this plan to one trillion dollars. Of the $600 weekly allowance, $200 was left, and assistance to cities, States, and health care were excluded altogether.
A final decision must be made before Friday вЂ” then Congress goes on vacation, and after their completion, the hot phase of elections will begin.
An economist close to the Republicans, Michael R. Strain of the American Enterprise Institute, said in an interview with the New York Times last week that Donald Trump "doesn't really understand how bad the economy is and how dramatic the situation is for workers and families."