US economy suffers sharpest drop ever as GDP crashes nearly 32% during coronavirus peak

In the worst plunge ever recorded, the US economy contracted by 31.7 percent in the second quarter at the height of the Covid-19 crisis, according to revised data released by the Bureau of Economic Analysis on Thursday.

The latest US gross domestic product (GDP) reading is slightly better than the estimate issued last month, when the agency said that the world’s largest economy shrank at an annual rate of 32.9 percent in the April-June period.

Despite the upward revision, based on better than previously estimated private inventory investment and personal consumption expenditures (PCE), the GDP drop is still the sharpest on record. The previous worst quarterly drop since tracking began in 1947 was observed in the first three months of 1958, when GDP fell 10 percent on an annualized basis.

The plunge came as most business activities were paralyzed for weeks, and millions of Americans lost their jobs amid strict stay-at-home orders to contain the spread of the deadly virus. Despite having the highest number of coronavirus infections, the US gradually lifted lockdowns, possibly paving the way for partial recovery in the next quarter.

However, there are concerns that a second wave of Covid-19 may come this fall, further disrupting the economy. 

“The full economic effects of the Covid-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified,” the Bureau of Economic Analysis (BEA) said.

The US Labor Department published fresh data on initial jobless claims on Thursday. More than one million Americans filed for unemployment benefits for the first time in the week ending August 22. It was the 22nd time in 23 weeks that the number of initial claims remained over one million.

After the new economic data was released, the Dollar Index, which gauges the greenback against a basket of its main rivals, dropped to multi-day lows of around 92.5. At the same time, the euro jumped around 0.2 against the dollar. The US stock market was relatively unchanged despite the gloomy data, with the Dow Jones up around one percent and the tech-heavy Nasdaq Composite gaining slightly after the opening bell on Thursday.

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