United States: Second estimate confirms GDP contracts at historic rate in Q2
The economy declined at the sharpest rate on record in the second quarter as the pandemic and measures to contain it toppled activity. According to a second estimate GDP estimate released by the Bureau of Economic Analysis, the economy contracted 31.7% in Q2 in seasonally-adjusted annualized terms (SAAR), after shrinking 5.0% in the previous quarter. In annual terms, GDP plunged a titanic 9.1% in Q2, contrasting the first quarter’s 0.3% growth.
The main headwind in Q2 came from private consumption, which plunged 34.1% SAAR (Q1: -6.9% SAAR). Moreover, the downturn in business investment intensified significantly (Q2: -26.0% SAAR; Q1: -6.7% SAAR) on a marked drop in equipment investment. That said, government consumption growth accelerated in the quarter (Q2: +2.8% SAAR; Q1: +1.3% SAAR).
Turning to the external sector, exports of goods and services dived 63.2% in the second quarter (Q1: -9.5% SAAR), led by a freefall in exports of goods, while imports of goods and services shrank 54.0% (Q1: -15.0% SAAR). The external sector thus contributed 0.9 percentage points to the headline figure (Q1: +1.1 percentage points).
Commenting on the second quarter’s performance, James Marple, a senior economist at TD Economics, noted:
“We’ve had some time to digest the unprecedented decline in economic activity that took place earlier this year. Attention is now on the pace of the comeback. While there are signs of slowing in activity through the summer months as the virus spread, the switching on of the economy in May and June will still show up in double-digit annualized growth (likely in the neighborhood of 25% to 30% annualized) in the third quarter.”