The payment: A coronavirus-hit economy shrank at a record pace of 32.9% a year in the second quarter, underlining the size of the hole the US is in as it struggles to escape the deepest recession in American history to recover.
The tidal wave of damage from the first global pandemic in a century was almost as bad as Wall Street had expected. Analysts surveyed by MarketWatch had predicted a 35% drop in gross domestic product, the official scorecard for the US economy.
The economy started to recover in mid-May after a sharp decline at the beginning of the quarter, but the US is a long way behind, according to analysts. Millions of Americans are still unemployed, thousands of companies have closed, and many of those who remain open have had to cut back on business due to mild demand or continuing government restrictions.
The recent surge in coronavirus cases in about half of the states, particularly in large states such as Texas, Florida and California, has also dealt a fragile economic recovery.
Read:Consumer confidence is waning in July, indicating a stronger economic recovery
GDP has never shrunk by more than 10% in any quarter since the government began keeping track of it shortly after World War II.
What happened: Consumer spending, the main driver of the economy, fell 34.6% a year in the spring.
The decline in services – travel, tourism, medical care, eating out and the like – was particularly strong. Companies that depend on large customer groups and heavy shop traffic bore the brunt of the state locks after the outbreak of the pandemic. Service spending decreased by 43.5%.
Households also spent much less on goods, although the decline was not quite as steep. Purchases declined by 11.3%. Americans bought more cars, groceries, and certain other household items, many working from home, but sales of clothing, gasoline, and many other goods declined sharply.
Read:Unemployment claims are rising for the second year in a row as US economic activity slows
Corporate investment also stumbled sharply as companies freeze or cut spending. Spending on infrastructure such as oil platforms decreased by 35%, while spending on equipment decreased by 37.7%. Both are record declines.
Investments in new homes have also shrunk by 38.7%, but appear to have declined rapidly. Record mortgage rates have fueled a flood of new home sales and have prompted builders to push construction toward the end of the quarter.
Inventories also declined a whopping $ 234.6 billion a year in the second quarter, compared to a drop of $ 80 billion in the first quarter.
Companies reduced their production when sales slumped and exports fell. This has also weighed heavily on the economy, although production has picked up again in recent months following the largely reopened economy.
Government spending was mixed. The federal government has intervened with massive relief supplies for businesses, households and the unemployed, but states and municipalities have suffered a sharp drop in tax revenue despite rising spending.
Overall, government spending rose by 2.7% in the spring. Federal spending rose more than 17% and offset a 5.6% drop in government and local spending.
The trade burdened the economy less. Exports decreased 64% in the second quarter, and imports decreased 53%. The corona virus caused massive disruptions in the global flow of trade and a worldwide economic slump led to far lower demand.
Read:The U.S. trade deficit shrinks 6% as exports recover, but the overall picture is still ugly
It can take months, if not years, for trade to fully recover, economists say, especially when the US and China are still in dispute over a number of issues. The two countries have the largest economies in the world.
Inflation fell 1.9% in the second quarter after rising earlier in the year. The cost of many goods and services fell as companies lowered prices to increase sales.
Inflation should remain low until the pandemic subsides.
Looking back at the first quarter, the originally reported 5% decline in GDP remained unchanged. The pandemic struck in early March, opening a large hole in the economy in the last month of the quarter.
Big picture: The economy is ready to expand in the third quarter, but the surge in coronavirus cases has already given some relief to the recovery. Economists surveyed by MarketWatch predict that GDP will grow by 18% from July to September, although estimates are likely to decrease.
The path to recovery depends heavily on whether Congress passes another massive aid package, economists say, and whether the virus can be brought back under control. Persistent uncertainty will only result in Americans saving more and spending less, which is damaging to the economy.
What do you say?: "The virus is the boss," said Navy Federal Credit Union economist Robert Frick. "The longer it takes, the deeper the damage."
Market reaction: The industrial average of Dow Jones
and S&P 500 index
have been set to open trades lower on Thursday. The shares have been trading in a narrow range in recent weeks.