U.S. gross domestic product (GDP) dropped 4.8 percent in the first quarter — its biggest decline since the 2008 Great Recession as the coronavirus pandemic slammed the economy, the Bureau of Economic Analysis reported on Wednesday (April 29).
“The decline in first quarter GDP was in part due to the response to the spread of COVID-19, as governments issued ‘stay-at-home’ orders in March,” the BEA said in releasing the downbeat report. “This led to rapid changes in demand as businesses and schools switched to remote work or canceled operations and consumers canceled, restricted or redirected their spending.”
The pullback marked a big reverse from 2019’s fourth quarter, when GDP rose 2.1 percent. Current‑dollar GDP dropped 3.5 percent — $191.2 billion — to $21.54 trillion. Comparatively, the fourth quarter showed the GDP was up 3.5 percent, or $186.6 billion.
The drop reflected “negative contributions from personal consumption expenditures (PCE), fixed investments, exports and private inventory investment that were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending,” the BEA reported. Imports also dropped.
The agency said PCE declined due to reduced services led by healthcare and fewer purchases of goods, led by motor vehicles and auto parts. Business investments also fell, mainly due to decreases in transportation equipment. Exports declined as well due to the travel-industry restrictions during the pandemic.
On the plus side the BEA said that personal income went up $95.2 billion; the fourth quarter showed an increase of $144.1 billion. Disposable income likewise rose by $76.7 billion in the latest period for a 1.9 percent gain. Comparatively, the fourth quarter showed an increase of $123.7 billion, or 3 percent.
In the first quarter, people saved $1.6 trillion, compared with $1.27 trillion in the fourth. The personal savings rate — a percentage of disposable income — was 9.6 percent, up from 7.6 percent in fourth quarter.
Overall, the GDP’s pullback represented its steepest quarterly decline since 2008’s fourth quarter as the Great Recession was just getting rolling. Wednesday’s number also represented the first quarterly GDP contraction at all in six years.