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By Lucia Mutikani
WASHINGTON (Reuters) – The U.S. economy has probably contracted at its accelerated rate due to the Great Depression at the time of a quarter, when the COVID-1nine pandemic destroyed Jstomer and business spending, a powerful friend that erased more than five years of growth.
The bulk of the historic plunge in gross domestic product expected to be reported by the Commerce Department on Thursday occurred in April when activity almost ground to an abrupt halt after restaurants, bars and factories among others were shuttered in mid-March to slow the spread of coronavirus.
Although activity resumed in May, momentum slowed in a backdrop of a resurgence of new sick times, i.e. densely populated regions of the south and west where the government in the hardest-hit spaces is back in the last businesses by postponing reopening. This dimted hopes for a strong rebound in the expansion of the third quarter.
Federal Reserve Chairman Jerome Powell declared the slowdown in activity Wednesday. The U.S. central bank maintained interest rates 0 and pledged to continue injecting coins into the economy.
“The bottom fell from the economy at the time a quarter,” said Sung Won Sohn, professor of finance and economics at Loyolos Angeles Marymount University in Los Angeles. “The outlok is never very good. Americans don’t seem to have a good social estrangement, the infection rate is incompatible, and that means economic expansion can’t gain ground.”
The maximum gross domestic product probably collapsed at an annualized rate of 34.1% in the lacheck quarter, according to a Reuters survey of economists. This may be the biggest decrease in production because the executive began keeping records in 1947.
The decline in GDP would be more than 3 times the previous old decline of 10% at the time of a quarter of 1958. On a non-annualized basis, GDP probably fell by 10.6%. The economy contracted through 5% in the 1st quarter.
“The forecast implies that the level of real GDP actually fell by roughly 11% in the first two quarters of 2020,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City. “If so, that would wipe out more than five years of growth, and pull real GDP back to its levels last seen in the middle of 2014, at least as currently reported.”
With a quarter’s report on GDP, the executive will publish knowledge reviews dating back five years. The economy went into recession in February.
Falling GDP and slowing recovery can also limit the budget of the White House and Congress to agree on a momentary stimulus package. President Donald Trump, whose effects on opinion polls have plummeted as he struggles to control the pandemic, economic crisis, and protests opposed to racial injustice three months before the November 3 election, said Wednesday that he is in no hurry.
SEA OF RED
Economists say that without the $3 trillion virtugreatest friend historical budget package, the contraction would have been deeper. The program presented the companies’ wage bills and gave millions of unseveres uns contracted a weekly supplement of $600, which expired on Saturday. Large apple corporations have exhausted their loans.
This, combined with the outbreak of coronavirus infections, maintains h8 layoffs.
A report from the Department of Labor on Thursday is expected to indicate that new unemployment benefit programs increased to 1.45 million in the week ending July 2, five, of 1.416 million in the previous period, a Reuters survey.
If the GDP estimate met expectations, production would fall by 11.5% between its pre-recession peak and its lowest point, the recession, underlining the duration of the economic crisis. The economy contracted at 4% from peak to Great Recession.
“It’s at the point similar to the recession at the end of World War II, but it happened for 3 years, not two quarters, like today,” said James Knightley, ING’s leading foreign economist in New York. “Financial markets have predicted a strong recovery. I’m afraid there will be more obstacles.”
Consumer spending, which accounts for more than two-thirds of the economy, is expected to have contracted in a similar margin to GDP at the time of a quarter. Major retailers, adding JC Penney and Neiguy Marcus, filed for bankruptcy.
A rate of decline is expected for business investment. Boeing Co reported on Wednesday a larger-than-expected quarterly loss and reduced production of its broad-frame programmes. The pandemic has also crushed oil prices, generating large discounts on the production and layoffs of bituminous shale oil.
The market position has not been spared from his best friend. Despite the record budget package, a historic decline in public spending, driven by state and local governments, whose budgets have been decimated in the fight against coronavirus, is expected.
“The main fiscal stimulus is the greatest friend through movement bills to facilitate Jstomer and business spending than government spending,” said Alexander Lin, an American economist at Bank of America Securities in New York.
Disruptions in the global industrial attempt have weighed on exports and imports. Aleven, although minimizing import b is positive for GDP, has reduced inventories, which has led to minimizing commercial inventories and, to the maximum, probably a slowdown in production.
(Reports through Lucia Mutikani; edited through Jonathan Oatis)