WASHINGTON (AP) — The U.S. economy shrank at an even faster pace than initially estimated in the first three months of this year with economists continuing to expect a far worse outcome in the current April-June quarter.
The Commerce Department reported Thursday that the gross domestic product, the broadest measure of economic health, fell at an annual rate of 5% in the first quarter, a bigger decline than the 4.8% drop first estimated a month ago.
It was the biggest quarterly decline since an 8.4% fall in the fourth quarter of 2008 during the depths of the financial crisis.
The downward revision to first quarter GDP reflected weaker investment by businesses in their inventories which was partially offset by slightly stronger consumer spending.
Economists believe the lockdowns that shut wide swaths of the economy and triggered the layoffs of millions of workers will send the GDP sinking at an annual rate of 40% in the current quarter. That would be the biggest quarterly decline on records that go back to 1947. It would be four times the size of the previous decline set back in 1958.
Many forecasters believe growth will rebound sharply in the July-September quarter with the Congressional Budget Office predicting GDP will rise at an annual rate of 21.5%. Still, that gain would not be nearly enough to make up for the economic output that was lost during the first and second quarters.
And many economists worry that the positive GDP performance being forecast for the second half of the year may not come about if the current efforts to re-open the economy do not go well. If the relaxing of stay-at-home rules results in a second wave of the coronavirus that could be a serious setback to efforts to get consumers out shopping again in stores and eating in restaurants.