Second Quarter GDP Shrinks 32.9%

Real GDP contracted at a record seasonally adjusted annual rate of 32.9% during the second quarter of 2020, according to the Bureau of Economic Analysis’s “advance” estimate. Real GDP decreased 5.0% in the first quarter of 2020.

The second quarter GDP decline reflected the “stay at home” orders implemented in March and April in response to the spread of COVID-19. Schools and business continued to work remotely. Consumers and businesses canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the second quarter of 2020 because of data limitations.

Real GDP decline in the second quarter was a result of negative contributions in personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending. These were partly offset by federal government spending.

Consumption plunged in the second quarter, subtracting 25.05 percentage points (pp) from growth, down from a 4.75 pp subtraction during the first quarter of 2020. Inventories dragged on growth for the fifth straight quarter, subtracting 3.98 pp from GDP. Residential investment subtracted a total of 1.76 pp to GDP.

Business investment was negative for the fifth consecutive quarter, subtracting 3.62 pp from GDP growth. Investment in structures and equipment continued to decline and investment in intellectual property products subtracted 0.33 pp.

Government spending rose, adding 0.82 pp to GDP. The federal government contributed 1.23 pp while state governments subtracted 0.40 pp.

Read the BEA release.