Economy may see a record drop amid virus

Having endured what was surely a record-shattering slump last quarter, the U.S. economy faces a dim outlook as a resurgent coronavirus intensifies doubts about any sustained recovery the rest of the year.

A huge plunge in consumer spending as people stayed home and avoided shopping, traveling or gathering in crowds as the virus raged is estimated to have sent the economy sinking at a roughly 32% annual rate in the April-June quarter. That would be more than triple the previous worst quarterly economic fall, a 10% drop set in 1958. Depressed activity in such areas as business investment, home construction and government spending also likely contributed to the worst quarterly contraction on records dating to 1947.

On Thursday, the government will issue its first of three estimates of economic activity, as measured by the gross domestic product, for the April-June quarter.

So dizzying was the contraction last quarter that most analysts expect the economy to manage a sharp bounce back in the current July-September quarter, perhaps of as much as 17% or higher on an annual basis.

Yet with the rate of confirmed coronavirus cases now rising in a majority of states, more businesses being forced to pull back on reopenings and the Republican Senate proposing to scale back the government’s aid to the unemployed, the economy could worsen in the months ahead.

The Trump administration is betting against that outcome in asserting that the economy will rebound in the current quarter.

Noting that the economy can’t fully recover until the pandemic is defeated or a vaccine is available, economists envision a scenario in which a rebound in the current quarter would be followed by a sustained period of tepid growth or even recession.