As the spread of coronavirus across the world has halted almost the global economy, the US has recorded its more severe contraction since the 2008 recession. Various states across the US have imposed strict social distancing restrictions.
According to the official figures released on Monday, the largest economy shrank to 4.8%. It ended the record expansion after marking the first contraction since 2014. However, experts believe that the numbers hint at a full crisis as lockdown restrictions were not imposed until mid-March.
On Wednesday, the top policymaker in the Central Bank said that the pandemic is causing a human and economic hardship for the United States and the countries around the world.
The US has taken various steps to cushion the economic impact of the virus. It has spent nearly $3 trillion, including direct payments to unemployed families across the country. The reserve bank has also gone to decrease the interest rate.
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Chair Jerome Powell, the head of the Reserve bank, said on Wednesday that it would maintain the same levels until it was sure that the economy is back on track. Powell also warned that the pandemic would “weigh heavily” on the US economy.
Experts say that the contraction in the American economy is part of the global slowdown because of the coronavirus pandemic. China, where the virus first emerged and restriction was imposed for almost a quarter: recorded a contraction of 6.8%,
European countries are also facing economic effects as Germany reported that this year its economy is expected to shrink by 6.3%. The German economic minister said that the country would record its worst financial crisis since birth if the republic.
Rising Unemployment as US economy shrinks
Before the coronavirus outbreak in the country or around the globe, the US economy was expected to grow by 2% in 2020. However, as it became the worst-hit country by the virus, almost 95% of the country was in some form of restrictions or lockdown by mid-April.
Many states faced protests the social distancing measures, which are a major reason for rising unemployment in the country. Some states, including Georgia, Oklahoma, and California, have begun to ease the restriction by allowing some shops and public places to reopen.
Companies have also warned about the consequences of the pandemic as they shared their quarterly reports. Big companies like General Motors’ revenue has fallen by 8 percent. Boeing, which was already suffering because of its 737crash, recorded a downfall of 48% in revenues.
The companies said that to cope with revenue hits, they would cut some jobs and plans to reduce output.
Meanwhile, the commerce department on Wednesday announced that consumer spending, which accounts for almost two-thirds of the US economy, dropped by 7.6% in the first three months of 2020. Spending on clothes and footwear purchases were down by 40% while accommodation and food services plummeted more than 70%.
Economic experts have warned that the economic situation in the country is expected to more severe in the months to come. However, as the government receives more data, the first quarter is expected to be revised lower.
