The US economy saw its biggest contraction in history in the second quarter as the country’s gross domestic product fell at an annual rate of 32.9%, CNBC reports.
The plunge was slightly less than expected. The Dow Jones had projected a drop of 34.7%.
But the collapse marks the worst drop in a single quarter ever, higher than at any point during the Great Depression.
The drop “just highlights how deep and dark the hole is that the economy cratered into in Q2,” Mark Zandi, the chief economist at Moody’s Analytics, told CNBC. “It’s a very deep and dark hole and we’re coming out of it, but it’ going to take a long time to get out.”
Q2 sees massive spending drop:
The GDP collapse was driven by a drop in personal consumption, exports, inventories, investment, and government spending, CNBC reported.
Personal consumption alone amounted to a 25% GDP drop, according to the report.
Prices for domestic purchases also fell slightly.
Personal income rises:
On the other hand, personal income increase substantially as a result of government aid.
Disposable personal income increased by 42% in the second quarter.
But despite the rise, spending continued to drop.
“Bottom line, the numbers of course are alarming but all self inflicted with about half the quarter reflecting almost full shutdown and the other half the slow reopening,” Peter Boockvar, the chief investment officer at the Bleakley Advisory Group, told CNBC. “That said, it does reflect the hole out of which we now need to climb out of as we rebound in Q3 and Q4.”