Final 1Q GDP Estimate Shows Economic Growth Down 5%

Real gross domestic product decreased by 5 percent in the first quarter, according to the third (final) estimate released Thursday by the Bureau of Economic Analysis.

The decline was unchanged from the second (revised) estimate released in May. In the fourth quarter, real GDP increased by 2.1 percent. The third estimate took into account an upward revision to nonresidential fixed investment, offset by downward revisions to private inventory investment, personal consumption expenditures and exports.

BEA said the decline in first quarter GDP reflected the response to the spread of COVID-19, as governments issued “stay-at-home” orders in March. “This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations and consumers canceled, restricted or redirected their spending,” BEA said. “The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.”

The report said the decrease in real GDP in the first quarter reflected negative contributions from PCE, private inventory investment, exports and nonresidential fixed investment, partly offset by positive contributions from residential fixed investment, federal government spending and state and local government spending. Imports, a subtraction in the calculation of GDP, decreased.

The decrease in PCE reflected a decrease in services, led by health care as well as food services and accommodations. The decrease in private inventory investment was mainly in manufacturing, led by petroleum and coal products. The decrease in exports primarily reflected a decrease in services, led by travel. The decrease in nonresidential fixed investment primarily reflected a decrease in equipment, led by transportation equipment.