Updated figures reveal U.S. gross domestic product for the second quarter of the year fell 31.4% - the largest quarterly drop on record - as a result of the economic damage inflicted by the COVID-19 pandemic.
The U.S. Department of Commerce on Thursday released revised second-quarter gross domestic product data - which was slightly lower than an initial 31.7% estimated in September. The U.S. economy contracted 5% in the first quarter ending a nearly 11-year-long economic expansion, the longest in U.S. history.
Quarterly U.S. gross domestic product had never fallen by more than 10% on an annualized basis in any quarter since the government began keeping records after World War Two. The largest gross domestic product contraction was 10% in the first quarter of 1958 when Dwight Eisenhower was president.
Both consumer and business spending, which account for about three quarters of gross domestic product, fell in the second quarter. Consumer spending, the main driver of economic growth, shrank 33.2% from the first quarter.
Business investments in infrastructure and equipment each contracted by more than 30%. Both were record declines.
The second-quarter gross domestic product contraction, however, sets the stage for a big rebound in the third quarter. Economists believe the economy will expand 30% then as businesses reopen and millions of Americans go back to work. If the 30% rise comes about it will shatter the old record for a quarterly gross domestic product increase.
The rise, however, will be followed by a 4% economic slowing in the fourth quarter, the said. The U.S. economy might fall again into recession.
Economists see a 'W" shaped recovery, or a double-dip recession, as a possibility unless Republicans in the U.S. Congress refuse to pass the amended $2.4 trillion Heroes Act proposed by Democrats to save the economy. Republicans want to spend far less and their previous spending proposal came to $500 billion.
"There are a lot of potential pitfalls out there," said Gus Faucher, chief economist at PNC Financial Services. "We are still dealing with a number of significant reductions because of the pandemic."
He said Republican intransigence and other threats in the form of uncertainty over the election, will have an effect on gross domestic product. "All this political uncertainty has the potential to weigh on economic growth," he said.