U.S. suffered worst quarterly contraction on record as virus ravages economy

Source: Politico | July 29, 2020 | Ben White

When the economy was tumbling in the second quarter, Trump pumped up the third quarter. Now the high hopes are slowly deflating.

The U.S. economy crashed in historic fashion this year — shrinking at a nearly 33 percent annualized pace in the second quarter — as the coronavirus pandemic ravaged businesses and sent joblessness soaring. The question now for President Donald Trump, trailing in the polls and facing a daunting reelection effort, is just how much conditions can snap back in the months leading up to Election Day.

At least for the moment, the spike in Covid-19 cases, the potential for fresh trouble this fall and a bitter fight over how to pump more federal money into the ailing economy suggest the sharp bounce-back Trump is counting on may not show up in a way he envisions.

And the potential for another leg of the downturn hangs over a president who once counted the economy as by far his strongest selling point to voters.

“This is obviously the ugliest quarter we’ve ever seen in our history,” Edward Moya, senior analyst at currency trading firm OANDA, said of the Commerce Department’s initial estimate of second-quarter gross domestic product, which showed the economy contracting 32.9 percent on an annualized basis, the biggest drop in more than seven decades of records.

“A couple of weeks ago there was a lot more optimism that we would see a strong V-shaped recovery,” Moya said. But right now “there is a lot of bad news about how some areas are handling the virus. And every day we don’t have a new stimulus agreement in place is hurting the economy.”

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