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April 29, 2020

Pandemic prompts first quarterly GDP drop since 2014

Photo | Grant Welker The Solomon Pond Mall in Marlborough, like other shopping malls, has been closed during the height of the coronavirus pandemic.

U.S. gross domestic product contracted by 4.8 percent in the first quarter, the Bureau of Economic Analysis reported Wednesday morning, shedding more light on the economic ramifications of the COVID-19 pandemic.

Wednesday's estimate from the BEA marks the first quarterly drop in GDP since 2014. Economists said the impacts of forced business shutdowns and drastic declines in mobility are reflected in the first quarter estimate to a degree, but cautioned in a technical note that the full picture is not yet known.

The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued 'stay-at-home' orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending," the BEA wrote. "The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified."

A second estimate for the first quarter, which the BEA said will be based on more complete data, will be released May 28. Over the first three months of 2020, personal consumption was down 7.6 percent and consumption of services declined by 10.2 percent, according to the BEA.

Federal government consumption expenditures and gross investment was up 1.7 percent, though the BEA said it "does not expect to be able to separately identify the total quarterly or annual effect of the [Congressional relief bills] on GDP growth."

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