Before you read any further, stop and make a guess of how much you think US GDP fell by in the second quarter of 2020 versus the second quarter of 2019:
- Less than 10%
- Between 10 and 30%
- More than 30%
The answer – based on data reported so far – is 9%. On the one hand, it may give some comfort that a country could go through significant shutdowns with output dropping by only 9%. On the other hand, this 9% is an average number over the entire economy and hides the big hit to certain service sectors including healthcare, transport, recreation, food services & accommodation – where output fell by double digit percentages.
The contraction in GDP was dominated by a a fall in services
Just under half of US economic output involves the provision of services (about $8.7 trillion out of $19.5 trillion for the second quarter of 2020). Services reduced by about $1.3 trillion year on year in the second quarter, accounting for over two thirds of the total decrease in GDP of the economy (a $1.8 trillion decrease) for the period year on year.
Personal consumption of goods was robust, down just 3% year on year
While clothing and footwear, as well as gasoline and other energy goods fell very significantly (29% and 45%, respectively), these large decreases were significantly offset by an increase in food and beverages for off-premises consumption (up 11% year on year for the quarter).
Personal consumption of services plummeted, particularly health, transport, recreation and food/accommodation services
The largest sub-category within personal consumption of services is Housing/Utilities which increased slightly year on year for the quarter, partly hiding the severe drop off in other sub-sectors within services. Healthcare, Transportation, Recreation and Food services/accommodations dropped by 18%, 39%, 53% and 39%, respectively for the quarter year on year, showing how severe people and businesses were affected in those sectors.
In summary, the US economy was quite resilient to the COVID-19 pandemic on aggregate, but the effects on specific sectors – notably services – was severe.
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