Real GDP plummeted 4.8 percent in the first quarter:
This is a little surprising: business lockdowns only started at the tail end of the quarter and shouldn’t have had a huge effect. This suggests that the economy may have been heading for a slide even before it got hit by the coronavirus pandemic.
The slowdown hit everywhere. Both personal consumption and private investment were down. Durable goods were down. Services were down. Fixed investment was down. Both imports and exports of services were down.
Among consumption of goods, the biggest drops were in autos and clothing. Among services, the biggest drops were in food, recreation, and health care. Among investment, the biggest drop was in business equipment.
All of this together suggests that the economy was on the edge of recession already, and both consumption and investment then cratered in response to fear of the coronavirus even before it had a concrete effect on the economy. Next quarter should be even worse.
On the other hand: I’ll point out yet again that it doesn’t feel like a typical economic implosion, does it? A drop of this magnitude would normally be accompanied by a huge amount of economic fear, but this time everyone knows exactly why the drop occurred and what has to happen to stop it. In the meantime, everyone also knows that massive government assistance is either here or on the way soon. Our fear right now isn’t truly economic, it’s fear of the virus. This means we can still get out of this with only moderate damage if we handle the pandemic itself properly.