GDP Slump Sees US Economy End Longest Ever Expansion

The US economy contracted in the first quarter at its sharpest pace since the Great Recession as stringent measures to slow the spread of the novel coronavirus almost shut down the country, ending the longest expansion in the nation's history.

The Commerce Department said gross domestic product fell at a 4.8 per cent annualised rate in the January-to-March period after expanding at a 2.1 per cent rate in the final three months of 2019. Economists had been looking for a GDP contraction of 4 per cent, though estimates ranged to as low as negative 15 per cent.

The decline reflected a plunge in economic activity in the last two weeks of March, which saw millions of Americans seeking unemployment benefits. The snapshot will reinforce analysts' predictions that the economy was already in a deep contraction.

Most of the key components of US economic output - including consumer spending, which accounts for two-thirds of economic activity – fell sharply.

"The economy is in freefall, we could be approaching something much worse than a deep recession," said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles.

"It's premature to talk about a recovery at this moment, we are going to be seeing a lot of bankruptcies for small and medium sized businesses."

The first-quarter decline was the steepest pace of contraction in GDP since the first quarter of 2009.

Many factories and non-essential businesses like restaurants and other social venues were shut or operated below capacity amid nationwide lockdowns to control the spread of Covid-19, the potentially lethal respiratory illness caused by the virus.

The dismal report, together with record unemployment, could pile pressure on states and local governments to reopen their economies.

It could also spell more trouble for President Donald Trump following criticism of the White House's initial slow response to the pandemic, as he seeks re-election in November. Confirmed US Covid-19 infections have topped one million, according to a Johns Hopkins University tally. (Reuters)