After sliding 31.4% in spring, U.S. economy likely to shrink in 2020

WASHINGTON — The U.S. economy plunged at an unprecedented rate in the spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year for the first time since the Great Recession.

The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4 percent in the AprilJune quarter, only slightly changed from the 31.7 percent drop estimated one month ago, the Commerce Department reported Wednesday.

The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10 percent in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.

Economists believe the economy will expand at an annual rate of 30 percent in the current quarter as businesses have reopened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7 percent surge in the first quarter of 1950 when Harry Truman was president.

The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.

While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a long shot.

Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4 percent and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID19. There are upticks in infections occurring right now in some regions of the country.

“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”

In 2020, economists expect GDP to fall by around 4 percent, which would mark the first annual decline in GDP since a drop of 2.5 percent in 2009 during the recession triggered by the 2008 financial crisis.

The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored.