US growth revised lower in first quarter, with economy shrinking by 5%

Economists expected the second reading to show a 4.8% decline

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The American economy shrank more than expected in the first quarter of the year as the coronavirus pandemic triggered an unprecedented lockdown of the nation, according to new figures published by the Commerce Department on Wednesday.

Gross domestic product, the broadest measure of goods and services produced across the economy, fell at a seasonally adjusted annual rate of 5 percent in the three-month period from January through March, the Commerce Department said in its second reading of the data Thursday.

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GDP was expected to remain unrevised at 4.8 percent, according to economists surveyed by Refinitiv.

"This is a dramatic result, given the strong position the US economy was in during January-February," said Cailin Birch, global economist at The Economist Intelligence Unit. "The imposition of stay-at-home orders across much of the country in only the last 2-3 week of March was enough to prompt the steepest quarter-on-quarter contraction in recent history. This is a major concern looking ahead to the rest of 2020."

It was the worst drop since the first quarter of 2009, when the economy contracted by 4.4 percent in the midst of the financial crisis.

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The revision, which relies on more complete data, reflected a drop in weaker investment by businesses in their inventory, which was partially offset by stronger consumer spending.

Still, the severity of the coronavirus-induced downturn will be reflected more accurately in the second quarter, when the nation’s economy came to a near standstill to mitigate the spread of the virus. Estimates vary widely — Goldman Sachs forecast a decline of 34 percent — but economists agree it’ll be grim, possibly surpassing the worst of the Great Depression. 

The economy is expected to see a rebound in the third- and fourth-quarters of the year; the Congressional Budget Office, a nonpartisan agency, has forecast that GDP could increase by 23.5 percent in the third quarter and 10.5 percent in the fourth.

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