The world’s largest economy has to deal with numerous challenges. Importantly, the coronavirus pandemic had a tremendous impact on the U.S. economy. Unfortunately, companies are struggling to stay afloat as they have to cope with huge pressure. Moreover, the pandemic is far from being over and nobody for sure how long it would take to eliminate all hot spots around the world.
According to the report released by the Commerce Department, the gross domestic product (GDP) the economy’s total output of goods and services declined at a rate of 31.4% in the second quarter. It is worth noting that, this result only slightly changed from a 31.7% drop estimated one month ago.
Importantly, the report showed a decline that was more than three times larger than the previous record-holder. The previous record dates back to the first quarter of 1958. At that time, Dwight Eisenhower was president of the country.
Economists expect the economy to expand at an annual rate of 30% in the current quarter. Businesses opened their doors and millions of people returned to work. Notably, that would shatter the old record for a quarterly GDP increase, that goes back to the first quarter of 1950. Interestingly, in the first quarter of 1950 GDP rose by 16.7% when Harry Truman was president.
As mentioned earlier, the coronavirus pandemic inflicted considerable damage on the economy. Developed as well as developing countries are struggling to deal with the economic impact of the pandemic. For example, millions of people lost their jobs. Unfortunately, in many cases, it won’t be easy to get the economy back on track. Governments should do whatever they can to help their citizens.
U.S. economy and politics
Interestingly, the government will not release its July-September GDP report until October 29. As a reminder, the U.S. presidential election in five days from October 29. The data may influence the outcome.
It is worth noting that, President Donald Trump is counting on an economic rebound to convince voters to give him a second term. However, everything is more complicated as according to economists any such bounce back this year is a longshot.
Interestingly, economists are forecasting that growth will slow significantly in the fourth quarter of 2020 to a rate of 4%. Moreover, it could topple back into recession if the U.S. Congress fails to pass another stimulus measure. Another risk factor is the resurgence of the coronavirus pandemic. The number of coronaviruses cases increased in some regions of the country, including New York, the most city in the U.S.
Importantly, apart from the stimulus measure, there are other threats in the form of uncertainty regarding the upcoming election. People should keep in mind that, all this uncertainty has the potential to affect economic growth.
From the beginning of the year, the economy fell at a 5% rate in the first quarter. Moreover, the drop was followed by the second-quarter decline of 31.4%. Nevertheless, the Trump administration says that solid growth in the coming quarters will restore all the output lost by the pandemic. The government should work with companies to boost the economy.
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