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Thursday, July 2, 2020
HomeNewsEconomyGDP: U.S. Economy Growth Almost Non-Existent, Falls to 0.5%

GDP: U.S. Economy Growth Almost Non-Existent, Falls to 0.5%

Gross-Domestic-Product-GDP-Reuters
Gross-Domestic-Product-GDP-Reuters

File photo: Shipping cranes and containers at a U.S. port representing exports and imports factored in overall gross domestic product, or GDP. (Photo: REUTERS)

The Commerce Department said the first reading of first-quarter gross domestic product (GDP) showed the U.S. economy grew at an annualized pace of just 0.5%, down from the fourth-quarter’s final reading of 1.4% , according to the Commerce Department.

The report released by the Commerce Department on Wednesday missed the median forecast. Economists polled by Reuters had forecast the economy to expand at a larger but still abysmal 0.7% rate in the first quarter.

The economy grew at a 1.4 percent pace in the fourth quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.9% rate. That was the slowest since the first quarter of 2015 and was a deceleration from the fourth quarter’s 2.4% rate. Disposable household income after accounting for taxes and inflation increased 2.9% in the first quarter, which followed a 2.3% gain in the prior period.

Yet, Americans are holding back on spending, including on big-ticket items such automobiles. Savings rose to a whopping $712.3 billion from $678.3 billion in the fourth quarter. As a result of less spending, businesses placed fewer orders for goods and reduced inventory. In the first quarter, businesses accumulated $60.9 billion worth of inventory, down from $78.3 billion in the fourth quarter.

The inventory cut sliced off 0.33 percentage point from first-quarter GDP growth, an increase from the 0.22 percentage point it took from GDP in the fourth quarter.

Written by
Staff Writing Group

PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.

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