The United States posted the worst economic data since the financial crisis of 2008 today, showing its economy contracted by 4.8% in 1Q2020.
The decline was the steepest since 4Q2008, when GDP fell by 8.4%. But many economists expect today's figures, published by the US Commerce Department, to mark only the start of a painful economic fallout.
Hinesh Patel, portfolio manager at Quilter Investors, said: "While it is no surprise to see the end of the longest economic expansion on record in the US, the pace at which things have reversed is extraordinary and investors should brace themselves for grim data prints in the second and third quarters.
While the covid-19 infection and death rates appear to have passed through their peaks, for the economic fallout this is just the beginning. Expectations have pegged growth for the second quarter in the US at anywhere between -20% and -30%."
"While the covid-19 infection and death rates appear to have passed through their peaks, for the economic fallout this is just the beginning. Expectations have pegged growth for the second quarter in the US at anywhere between -20% and -30%."
The Commerce Department attributed the decline in 1Q GDP in large part due to the lockdown in place since the middle of March.
In its report today, the Department said: "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."
Patel added: "It is difficult to know right now which businesses will emerge from this crisis intact, and which will ultimately succumb to the lack of demand and a permanent change in consumer behaviour. What is clear, though, is that investors cannot predict when we will be through the worst and the recovery can begin. While markets have been rising over the past few weeks they should remember that further data to come out will not paint a good picture and the road ahead will be bumpy."
Artur Baluszynski, head of research at Henderson Rowe, reminded that "Trump's administration recommended closing the economy in late March. This means that this contraction happened in three to four weeks, a brutally sharp deceleration. This is officially the end of the longest economic expansion on record."