WASHINGTON (Reuters) – The U.S. economy likely contracted in the first quarter at its sharpest pace since the Great Recession as stringent measures to slow the spread of the novel coronavirus almost shut down the country, ending the longest expansion in the nation’s history.
FILE PHOTO: People wearing protective masks walk past closed shops on the the Coney Island boardwalk during the outbreak of coronavirus disease (COVID-19) in Brooklyn, New York, U.S., April 11, 2020. Picture taken April 11, 2020. REUTERS/Caitlin Ochs
The anticipated decline in gross domestic product (GDP) will reflect a plunge in economic activity in the last two weeks of March, which saw millions of Americans seeking unemployment benefits. The Commerce Department’s snapshot of first-quarter GDP on Wednesday will reinforce analysts’ predictions that the economy was already in a deep recession.
“The economy is in free fall, we could be approaching something much worse than a deep recession,” said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles. “It’s premature to talk about a recovery at this moment, we are going to be seeing a lot of bankruptcies for small and medium sized businesses.”
Gross domestic product probably decreased at a 4.0% annualized rate last quarter, weighed down by sharp declines in consumer spending and a drawdown of inventory at businesses, according to a Reuters survey of economists.
That would the steepest pace of contraction in GDP since the first quarter of 2009. A deepening downturn in investment by businesses was likely another major factor in the slump last quarter. Those drags probably overshadowed positive news from a shrinking import bill, the housing market and more spending by the government.
Estimates in the survey were as low as a 15% drop in GDP, which would be the steepest decline on record.
According to Kwok Ping Tsang, an associate professor of economics in