Published August 7, 2020
The Commerce Department said that the U.S. gross domestic product declined at a seasonally and inflation-adjusted 32.9 percent annual rate. It was the steepest drop in 70 years of record-keeping. The U.S. economy is driven by consumer spending, which represents about 70 percent of the U.S. economy. But if one can’t go to a restaurant or the hair salon, spending will decline. Spending on nondurable goods such as clothing and groceries fell by 15.95 percent. At the same time, spending on durable goods fell only by 1.4 percent. Plenty of stimulus money was not spent. The personal savings rate swelled, as worries over the virus and the economy caused people to retain cash.
The unemployment rate increased, with the number of people receiving unemployment benefits rising to 17 million in the week ending July 18.
While the economy slowed, the tech-heavy U.S. Nasdaq stock market traded at its highs, owing to stimulus from the government and the increase in money supply from the Federal Reserve. Without the stimulus, the economic decline would have been worse. However, some of the stimulus is running out.
Because of job losses, housing will become an issue as people are no longer able to afford their rent or mortgages. Commercial and retail real estate, which historically provided reliable cash flow and income, is also under pressure due to the bankruptcies of many well-known companies and the reconfiguration of how and where people work.
The time of late August and early September normally […]