Record-long US expansion to see its end in Q1 GDP

Washington

LESS than a year ago, the US economic expansion was celebrated as the longest on record. This week its end will become all but official.

Commerce Department figures due on Wednesday are projected to show gross domestic product shrank at a 3.8 per cent annualised rate from January through March amid the Covid-19 pandemic and government-mandated lockdowns aimed at preventing its spread. Such a decline would be the steepest since just before the last recession ended in 2009.

And it pales against expectations for the second quarter, with the worst estimate for a previously unimaginable 65 per cent pace of contraction, by far a record in data back to the 1940s. The main economic questions now revolve around the duration of the slowdown and the shape of the recovery as governments gradually lift restrictions on businesses and schools.

Nonetheless, the US figures will go down in history as marking the beginning of the recession - or the peak of the business cycle, in the argot of economists. While a panel of academic arbiters will officially decide the downturn's start date in a few months, the GDP figures will underscore what's already clear from government data that show tens of millions of job losses along with plunges in consumer spending and factory output.

"The first quarter turning negative will make it quite clear that the business cycle turned - and a recession started - at some point in the first quarter," said Michelle Meyer, head of US economics at Bank of America Corp. She estimated a 7 per cent annualised contraction in the January-March period and 30 per cent in the second quarter.

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The pandemic has not only wiped out a decade of job gains and a half-century low in unemployment, it's endangered the benefits that were finally starting to reach neglected parts of the socioeconomic spectrum.

Then there are the political implications for the November election and the campaign of President Donald Trump, whose optimism about the strength of the job market and economy were a fixture until recent weeks. BLOOMBERG