06 de junio de 2020
English - News

CBO: US GDP to fall annualized 38 percent in 2nd quarter

Washington, May 19 (efe-epa).- The US gross domestic product will fall by an annualized 38 percent during the second quarter of this year due to the social distancing measures implemented to limit the spread of the coronavirus, a situation that will mean an end to the longest US economic expansion since World War II, according to the forecast released by the Congressional Budget Office on Tuesday.

In a report containing its preliminary outlook for the rest of this year and 2021, the CBO expects the US labor market to suffer its worst deterioration since the 1930s, with an average of 15 percent unemployment compared to the 4 percent figure from the fourth quarter of 2019.

The CBO projects that the US economy will contract at a 37.7 percent annual rate between April and June, but then partially bounce back, expanding at a 21.5 percent annual pace in the July-September period.

"The economy is expected to begin recovering during the second half of 2020 as concerns about the pandemic diminish and as state and local governments ease restrictions," the CBO said in remarks accompanying its figures.

"The decline in economic activity has been so rapid and so recent that the depth of the downturn is still uncertain, and the data on spending are preliminary and incomplete," the office wrote.

The CBO said that the economic stimulus funds approved so far will hike the federal deficit by some $2.1 trillion during Fiscal Year 2020 and another $600 billion in 2021, levels that equate to about 11 percent of nominal GDP in Fiscal 2020 and 3 percent in 2021.

Regarding the unemployment rate, the CBO said that it rose from 3.5 percent in February to 14.7 percent in April, reflecting a reduction of more than 25 million people on the payrolls and a decline of some 8 million people in the labor force as a whole.

"During the second quarter of 2020, the labor market is projected to see the steepest deterioration since the 1930s," the CBO said.

The office said it expects the jobless rate to peak in the third quarter, averaging almost 16 percent, but then decline steadily during a lengthy economic recovery and remaining at just under 9 percent into the fourth quarter of next year.

"The persistence of social distancing will keep economic activity and labor market conditions suppressed for some time," the CBO said.

On Tuesday, Treasury Secretary Steven Mnuchin warned of the risk of "permanent damage" to the US economy if the coronavirus quarantines remain in place. The secretary appeared in a teleconference before the Senate banking committee to discuss the economic outlook and the effectiveness of the $2.2 trillion rescue package approved in April.

Meanwhile, Federal Reserve Chairman Jerome Powell asked Congress during that same committee hearing to approve more fiscal stimulus funds, saying that the measures taken to contain the coronavirus represent an investment in the country's individual and collective health.


Contenido relacionado

US Treasury secretary warns of long-term damage if lockdowns are extended

By Alfonso Fernandez

Washington, May 19 (efe-epa).- The United States' Treasury secretary warned Tuesday of potential long-term economic damage if lockdown measures imposed by states to halt the spread of the novel coronavirus are further extended.

Steven Mnuchin made his remarks to the Senate Committee on Banking, Housing and Urban Affairs in a joint appearance via videoconference along with Federal Reserve Chairman Jerome Powell, who urged Congress to pass more fiscal stimulus in addition to the nearly $3 trillion already approved.

Amid the country's worst crisis in 70 years, the two officials evaluated the country's economic prospects and the effectiveness of the record $2.2 trillion rescue package approved in April to boost an economy battered by the Covid-19-triggered lockdowns.

Mnuchin, a member of US President Donald Trump's Cabinet, said direct payments to middle-class Americans, small business loans, expanded unemployment benefits and other financial assistance measures are working, although he also called for a gradual reopening after weeks of stay-at-home orders and closures of non-essential businesses.

"There is the risk of permanent damage" if the US does not make further strides toward reopening the economy, Mnuchin told the senators. "We're conscious of the health issues and we want to do this in a safe way."

He said to expect economic indicators to continue to worsen in the second quarter but projected that they will improve in the third and fourth quarters of the year.

During his appearance, Mnuchin faced tough questioning from Sherrod Brown, a Democratic senator from Ohio and the committee's ranking member.

"How many workers should give their lives to increase the GDP or the Dow Jones (a key Wall Street blue-chip index) by a thousand points?" he asked.

Mnuchin replied by saying, "no workers should give their lives to do that, Mr. Senator, and I think your characterization is unfair."

More than two-thirds of the 50 US states have begun to gradually lift the economic restrictions imposed in the second half of March, although states such as California have still not given the go-ahead for malls to reopen or restaurants to serve customers inside their establishments.

Powell, for his part, told the senators Tuesday that Congress should do all it can to alleviate the economic impact of the coronavirus-triggered lockdowns, making those remarks at a time when legislators are negotiating a new fiscal stimulus package.

"It is worth remembering that the measures taken to contain the virus represent an investment in our individual and collective health. As a society, we should do everything we can to provide relief to those who are suffering for the public good," he said.

He added that on the monetary side the Fed "is committed to using (its) full range of tools to support the economy in this challenging time," having already taken steps that include injecting massive liquidity into financial markets, making large-scale purchases of Treasuries and agency mortgage-backed securities and lowering its benchmark interest rate to practically zero.

Powell, however, said those actions are "only part of a broader public-sector response."

The Fed chairman has not been receptive to calls by Trump and others for the central bank to lower its federal-funds rate into negative territory, which in practice would mean that banks would have to pay to park their excess cash at the central bank and therefore be encouraged to lend those funds out instead.

The Fed has long maintained that monetary tool would not be effective for the US, and last Wednesday Powell said such a move is not under consideration.

The Democratic-controlled House of Representatives last Friday passed a new $3 trillion coronavirus relief package that, if approved by the GOP-controlled Senate and signed into law by Trump, would more than double the amount of stimulus already approved by Congress in response to the current crisis.

But the White House and Republican lawmakers - and even some Democrats - have expressed opposition to certain measures in the bill such as stimulus checks for undocumented migrants. The GOP also wants to make sure that coronavirus relief money is not used to bail out states that had significant budget problems prior to the pandemic.

Trump, meanwhile, has signaled no intention of ceding to Democrats' demands.

"We have all the cards because we have the cards of the American people. I know what they want," the president said at the White House. "Phase four (of the stimulus programs) is going to happen but it's going to happen in a much better way for the American people."

The US has more than 1.5 million confirmed coronavirus cases and over 90,000 Covid-19-related deaths, according to the latest figures from Johns Hopkins University.

States' efforts to mitigate the impact of that potentially fatal respiratory disease, meanwhile, have caused economic devastation that Powell said last week "is hard to capture in words."

First-quarter gross domestic product declined by 4.8 percent, with the contraction in the second quarter expected to be much worse. On Tuesday, the Congressional Budget Office projected that US GDP will contract by a staggering 38 percent between April and June relative to the same three-month period of 2019.

The unemployment rate, meanwhile, skyrocketed in April by 10.3 percentage points to 14.7 percent - its highest level since the Great Depression of the 1930s. EFE-EPA




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