US Economy Shrank 9.5% in Second Quarter, -32.9% on Annual Basis

US real gross domestic product (GDP) decreased at an annual rate of 32.9 percent in the second quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 5.0 percent. The US economy shrank 9.5% in the second quarter.

The decrease in real GDP reflected decreases in personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending.

Current‑dollar GDP decreased 34.3 percent, or $2.15 trillion, in the second quarter to a level of $19.41 trillion. In the first quarter, GDP decreased 3.4 percent, or $186.3 billion.

Current-dollar personal income increased $1.39 trillion in the second quarter, compared with an increase of $193.4 billion in the first quarter. The increase in personal income was more than accounted for by an increase in personal current transfer receipts (notably, government social benefits) that was partly offset by declines in compensation and proprietors’ income. Additional information on several factors impacting personal income can be found in “Effects of Selected Federal Pandemic Response Programs on Personal Income.”

Disposable personal income increased $1.53 trillion, or 42.1 percent, in the second quarter, compared with an increase of $157.8 billion, or 3.9 percent, in the first quarter. Real disposable personal income increased 44.9 percent, compared with an increase of 2.6 percent.

Personal outlays decreased $1.57 trillion, after decreasing $232.5 billion. The decrease in outlays was led by a decrease in PCE for services.

Personal saving was $4.69 trillion in the second quarter, compared with $1.59 trillion in the first quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 25.7 percent in the second quarter, compared with 9.5 percent in the first quarter.

The June, 2020 US unemployment rate is 11.1%.

Germany GDP fell 10.1% in the second quarter. Germany’s jobless rate for July held steady at 6.4%, unchanged from June in a sign that the initial effects of the pandemic were easing.

In the euro area, gross domestic product is forecast to shrink by 8.7% this year and to increase by 6.1% in 2021. For the EU as a whole, the economy is forecast to contract by 8.3% in 2020 and grow by 5.8% in 2021. The contraction in 2020 is thus set to be around one percentage point worse than projected in the Spring Forecast. Overall, real global GDP (excluding the EU) is forecast to contract by around 4% in 2020 before a recovery of 5% in 2021. This implies that by the end of next year, global GDP would recover above the 2019 level, but remain substantially below the pre-pandemic global growth trajectory.

The global forecasts could massively change depending on what happens with COVID-19. There could be second or third waves of the disease or vaccination success.

China reported a positive 3.2% second quarter GDP.

SOURCES- Bureau of Economic Analysis, European Commission, DW, Reuters
Written By Brian Wang,