How Much Did the U.S. Economy Shrink in the First Quarter?
Because of the coronavirus (COVID-19), tens of millions of North Americans are out of work and quarantined, with the U.S. and Canadian economies grinding to a screeching halt. With first quarter economic data rolling in, we now have a picture of just how badly the coronavirus is destroying the North American economies.
First quarter U.S. gross domestic product (GDP) experienced its biggest decline since the Great Recession. Meanwhile, the Canadian economy is in its deepest recession ever; and a recovery is expected to take years.
First quarter U.S. GDP cratered 4.8%, the worst first quarter since the 2008 financial crisis and the first contraction since 2014. On top of that, consumer spending tumbled 7.6%, the most since 1980, and business investment shrank to an 11-year low of 8.6%.
It’s going to get worse before it gets better. Most businesses were open during the first quarter, only closing during the last few weeks of March. That hasn’t been the case in the second quarter. The U.S. economy was shuttered for all of April and is expected to be closed for much of May. Some states may not see their economies open up until June.
Even then, there’s more to restarting an economy than just flipping a switch. It’s going to take a long time before the U.S. economy resembles any form of normalcy. All we know for certain is that the longest bull market on record is dead replaced by the deepest U.S. recession in at least 80 years.
Is the Canadian Economy in a Recession?
According to a Reuters poll of economists, the Canadian economy is in its deepest recession ever, as it struggles to adapt to the coronavirus and a collapse in oil prices. Moreover, economists believe the Canadian economy will only experience a modest recovery over the coming years.
Economists have taken a dim outlook on the Canadian economy after it contracted by 9% in March and lost a record 1.0 million jobs. On top of that, oil prices are at record lows as the coronavirus brings the global economy to a halt.
And they are becoming increasingly pessimistic about the Canadian economy. In January, before any one was really paying attention to the coronavirus, economists were predicting modest GDP growth of 1.6% and 1.7%.
In the April 23-28 poll, 25 economists predicted that the Canadian economy would contract at an annualized rate of 9.8% in the first quarter. For the second quarter, these same economists believe the Canadian economy will shrink an eye water 37.5%.
If second quarter GDP numbers come anywhere close to that, it will represent the deepest recession in at least 60 years.
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The Canadian economy is in its worst recession on record and the U.S. economy is in its deepest recession since the Great Depression. Both economies were expected to rebound sharply in the third and fourth quarters, but it now looks like the North American economy will face additional downside risk in the back half of 2020. This doesn’t mean investors should run for the exits. If anything, the trading professionals at Learn-To-Trade.com can teach investors how to profit when the markets are soaring and crashing.
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