U.S. economy shrank 5% in first 3 months of 2020, update shows

Stacks of $100 bills are pictured in New York City on June 17. The Commerce Department said Thursday said many Americans canceled, restricted or redirected spending in January, February and March as a result of the coronavirus crisis. Photo by John Angelillo/UPI

June 25 (UPI) — The U.S. economy shrank by 5 percent in the first quarter of 2020, reflecting economic damage from the COVID-19 crisis, the Commerce Department said in an update Thursday.

Citing “rapid changes in demand as businesses and schools switched to remote work or canceled operations,” the department said in the report — its third estimate of first-quarter performance — that U.S. gross domestic product declined at an annualized rate of 5 percent between Jan. 1 through March 31.

In its initial estimate in April, the department estimated a 4.8 percent Q1 decline. The 5 percent decline is the U.S. economy’s steepest since the 1930s.

Thursday’s report said U.S. consumers “canceled, restricted or redirected” spending in the first quarter, mainly as a result of the coronavirus pandemic.

The contraction also resulted from a decline in exports and lower outlays for non-residential capital goods, like commercial real estate. The declines were partly offset by positive measures in home buying and government spending.

A forecast by the Federal Reserve Bank of Atlanta projects a decline of more than 45 percent in the second quarter, which experts say will give a better glimpse of the COVID-19 impact.

The Labor Department said Thursday another 1.5 million American workers filed for unemployment benefits last week.

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