US GDP contracts 4.8% as recession starts amid Covid-19

Consumer spending shrank at a 7.6% pace, the worst decline since 1980

A man wearing a mask bikes along the waterfront in Jersey City, N.J., with the Manhattan skyline behind him, Tuesday, April 28, 2020, amid the new coronavirus pandemic. Now, with states lifting their coronavirus restrictions piecemeal and according to their own, often arbitrary, timetables, Americans are facing a bewildering multitude of decisions about what they should and should not do to protect their health, their livelihoods and their neighbors. (AP Photo/Mark Lennihan)
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The record-long US economic expansion is over.

Gross domestic product contracted at a 4.8 per cent annualised rate in the January-March period, the largest drop since 2008, according to Commerce Department data released on Wednesday. The median projection in a Bloomberg survey of economists had called for a 4 per cent drop.

The report is the first to show the wide-scale hit to US output from Covid-19, which shut down business around the globe as governments sought to prevent the deadly, contagious disease from spreading.

With estimates for a second-quarter contraction that would be a record in data going back to the 1940s, the first-quarter figures effectively confirm that a recession has begun, ending the expansion that began in mid-2009 in the wake of the global financial crisis.

Consumer spending shrank at a 7.6 per cent pace, the worst decline since 1980, as restaurants and shops closed and Americans stayed home under government orders.

Non-residential business investment contracted at an 8.6 per cent rate, the most since 2009, when factories and other firms went offline as the virus spread and oil prices plummeted.

One bright spot is that residential construction spending surged at a 21 per cent rate, the best gain since 2012, helped by warm weather and low mortgage rates.

Final sales to domestic purchasers, seen as a more accurate gauge of underlying demand in the economy, fell at a 5.4 per cent rate. It excludes the volatile categories of trade - which boosted GDP growth by 1.3 percentage points - and inventories, which subtracted by 0.53 points.