US SET TO REPORT RECORD-BREAKING ECONOMIC PLUNGE

Having endured what was surely a record-shattering slump last quarter, the US economy faces a dim outlook as a resurgent coronavirus intensifies doubts about any sustained recovery the rest of the year, Martin Crutsinger wrote for the Associated Press (AP) late on July 29, 2020.

A huge plunge in consumer spending as people stayed home and avoided shopping, traveling or gathering in crowds as the virus raged is estimated to have sent the economy sinking at a roughly 32% annual rate in the April-June quarter. That would be more than triple the previous worst quarterly economic fall, a 10% drop set in 1958. Depressed activity in such areas as business investment, home construction and government spending also likely contributed to the worst quarterly contraction on records dating to 1947.

On Thursday, the government will issue its first of three estimates of economic activity, as measured by the gross domestic product, for the April-June quarter. So dizzying was the contraction last quarter that most analysts expect the economy to manage a sharp bounce-back in the current July-September quarter, perhaps of as much as 17% or higher on an annual basis. Yet, with the rate of confirmed coronavirus cases now rising in a majority of states, more businesses being forced to pull back on re-openings and the Republican Senate proposing to scale back the government’s aid to the unemployed, the economy could worsen in the months ahead.

The Trump administration is betting against that outcome in asserting that the economy will undergo a V-shaped recovery in which last quarter’s plunge would be followed by an impressive rebound in the current quarter — a hoped-for dose of good news that would be reported in late October, not long before Election Day. Yet many economists are talking about a different letter of the alphabet. Noting that the economy can’t fully recover until the pandemic is defeated or a vaccine is widely available, they envision a W-shaped scenario, in which a rebound in the current quarter would be followed by a sustained period of tepid growth or even outright recession.