Apr 29, 2020 - Economy & Business

U.S. economy shrinks 4.8% in first quarter

Data: Bureau of Economic Analysis; Chart: Axios Visuals

The U.S. economy shrank by an annualized 4.8% in the first quarter, the government said on Wednesday.

Why it matters: It's the biggest quarterly drop in over a decade and shows the beginning of an economic slowdown that's expected to get worse as the coronavirus roils the economy. Economists are bracing for current quarter figures, with some projecting a record annualized decline of about 40%.

What they're saying: The coronavirus 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 Commerce Department said in a release.

By the numbers: The biggest drag was the sharp drop in consumer spending, which makes up about 70% of U.S. economic activity.

  • It fell 7.6%, the most since 1980, per Bloomberg.
  • And business investment, which had already been sluggish in recent months, showed a quarterly drop of 8.6%.

Between the lines: The data is even worse "when you consider that the first two months of the first quarter were relatively normal and this number only includes the March lockdowns," Chris Zaccarelli of the Independent Advisor Alliance wrote in a note to clients this morning.

  • GDP estimates for the current quarter are dismal. At worst, economists say it could shrink by an annualized 41%, per FactSet.

The bottom line: The economy is undeniably in a recession, though official data is slow to confirm that. The Q1 contraction shows the beginning of the damage.

  • Economists are debating how quickly the U.S. economy will rebound as states begin to open back up.

Go deeper

Updated 1 hour ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 6,724.516 — Total deaths: 394,018 — Total recoveries — 2,996,832Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 1,894,753 — Total deaths: 109,042 — Total recoveries: 491,706 — Total tested: 19,231,444Map.
  3. Public health: WHCA president says White House violated social-distancing guidelines to make reporters "a prop" — Jailing practices contribute to spread.
  4. Sports: How coronavirus could reshuffle the sports calendar.
  5. Jobs: Better-than-expected jobs report boosts stock market.
  6. Media: The Athletic lays off 8% of staff, implements company-wide pay cut.

Scoop: German foreign minister to travel to Israel with warning on annexation

Heiko Maas. Photo: Michael Kappeler/picture alliance via Getty Images

German Foreign Minister Heiko Maas is expected to travel to Israel next week to warn that there will be consequences if Israeli leaders move forward with plans to annex parts of the West Bank, Israeli officials and European diplomats tell me.

Why it matters: Israeli and European officials agree that if Israel goes ahead with unilateral annexation, the EU will respond with sanctions.

Minneapolis will ban police chokeholds following George Floyd's death

A memorial for George Floyd at the site of his death in Minneapolis. Photo: Steel Brooks/Anadolu Agency via Getty Images

Minneapolis has agreed to ban the use of police chokeholds and will require nearby officers to act to stop them in the wake of George Floyd's death, AP reports.

Why it matters: The agreement between the city and the Minnesota Department of Human Rights, which has launched an investigation into Floyd's death while in police custody, will be enforceable in court.