Economy

Q1 GDP Fails to Impress or Surprise

The coronavirus pandemic ravaged the stock market when it first appeared back in February, and many suggested that it would be even worse for the global economy. These fears were well founded, as the U.S. economy shrank by 5% during the first quarter.

Real gross domestic product (GDP) decreased at an annual rate of 5.0% in the first quarter of 2020, according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1%.

In the second estimate, the decrease in real GDP was also 5.0%. With the third estimate, an upward revision to nonresidential fixed investment was offset by downward revisions to private inventory investment, personal consumption expenditures (PCE) and exports.

Overall, the decrease in real GDP in the first quarter reflected negative contributions from PCE, private inventory investment, exports and nonresidential fixed investment that were partly offset by positive contributions from residential fixed investment, federal government spending and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased in this time.

A few other highlights from the report included:

  • Real gross domestic income decreased 4.4% in the first quarter, in contrast to an increase of 3.1% in the fourth quarter.
  • Current‑dollar GDP decreased 3.4%, or $189.4 billion, in the first quarter to $21.54 trillion. In the fourth quarter, GDP increased 3.5%, or $186.6 billion.
  • The price index for gross domestic purchases increased 1.7% in the first quarter, compared with an increase of 1.4% in the fourth quarter.
  • The PCE price index increased 1.3%, compared with an increase of 1.4%.