By Tom Burnett CFA
On April 29, 2020, the Department of Commerce released its “advance notice” estimate of the nation’s annual rate of GDP growth for the first quarter of the 2020 year. The estimate came in at a negative annual rate of 4.8%, much greater than initial analyst estimates. The rate for the fourth quarter of 2019 was a positive 2.1%. The contraction of GDP was the first since the first quarter of 2014, and the largest decline since the Recession of 2008-09.
The decline of GDP was the direct result of the coronavirus outbreak and the resulting lockdown of economic activity. Consumer activity normally accounts for 65-70% of GDP so the large decline in personal consumption expenditures ($253 billion annual rate from the 2019 fourth quarter) during the March quarter was the main cause of the negative GDP growth rate. Today’s estimate will be updated on May 28 when more information on first quarter performance will be available.
Tom Burnett CFA is Director of Research