Tags: atlanta | fed | gdp | lockdown | pandemic | virus | economy

Atlanta Fed: GDP to Plunge 52.8% Amid Virus Lockdowns

Atlanta Fed: GDP to Plunge 52.8% Amid Virus Lockdowns
(mSur/Dreamstime)

By    |   Tuesday, 02 June 2020 10:52 AM

The Federal Reserve Bank of Atlanta warns that second-quarter gross domestic product is poised to plunge more than 50% as the nation grapples with the seeminly endless coronavirus pandemic and subsequent economic lockdowns.

The estimate is down from a May 29 projection of -51.9% growth and takes new data from the manufacturing and construction industries into account.

The Atlanta Fed revision came hours after the Institute of Supply Management on Monday said the organization's purchasing managers' index stabilized to 43.1 from 41.5 in May, slightly higher but still mired in contraction territory.

The Atlanta Fed's GDPNow forecast anticipates personal consumption expenditures, which make up 68% of the nation’s gross domestic product, to fall 58.1% in the April-to-June period. Gross private domestic investment, which accounts for 17% of GDP, is now projected to slide 62.6%.

The GDPNow reading undergoes regular revisions and generally is more accurate as it gets closer to the end of the quarter, which in this case is June 30, CNBC said. The New York Fed’s GDP Nowcast, which was last updated May 29, estimates a 35.5% Q2 drop, while CNBC’s Rapid Update survey of leading economists has a median 38% decline.

Such a big decline could portend a short-term burst but that likely will be followed by a “swoosh” recovery, market expert Ed Yardeni warned, according to CNBC.

Last month, the Congressional Budget Office warned that the U.S. economy will expand more in 2021 than previously projected, though the economic fallout from the coronavirus will have a long-lasting impact on the labor market.

The non-partisan agency’s update to its economic projections showed gross domestic product will increase 4.2% in 2021 on a fourth quarter-to-fourth quarter basis after slumping 5.6% this year. That compares with its preliminary April 24 estimate for a 2.8% increase next year.

The economy in the second quarter will contract at a historic 37.7% annualized rate, slightly less than the initial forecast. The agency still sees a bounce back in general economic activity in the second half of the year.

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The Federal Reserve Bank of Atlanta warns that second-quarter gross domestic product is poised to plunge more than 50% as the nation grapples with the seeminly endless coronavirus pandemic and subsequent economic lockdowns.
atlanta, fed, gdp, lockdown, pandemic, virus, economy
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2020-52-02
Tuesday, 02 June 2020 10:52 AM
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