U.S GDP shrank 4.8% in the first quarter amid biggest contraction since the financial crisis

PUBLISHED WED, APR 29 20208:33 AM EDT - CNBC

Jeff Cox

What is GDP: Simply put it is the Value of the Countries Economy

• GDP in the first quarter contracted 4.8%, compared to estimates of a 3.5% drop, the Bureau of Economic Analysis reported Wednesday.

• This was the first negative reading since the first quarter of 2014, though not as bad as the worst of the financial crisis.

• Economists expect the Q1 reading to decline even more when the final revisions are issued.

Gross domestic product fell 4.8% in the first quarter, according to government numbers released Wednesday that provide the first detailed glimpse into the deep damage the coronavirus wreaked on the U.S. economy.

Economist surveyed by Dow Jones had expected the first estimate of GDP to show a 3.5% contraction.

This marked the first negative GDP reading since the 1.1% decline in the first quarter of 2014 and the lowest level since the 8.4% plunge in Q4 of 2008 during the worst of the financial crisis.

The biggest drags on the economy were consumer spending, nonresidential fixed investment, exports and inventories. Residential fixed investment along with spending from both the federal and state governments helped offset some of the damage.

Consumer expenditures, which comprise 67% of total GDP, plunged 7.6% in the quarter as all nonessential stores were closed and the cornerstone of the U.S. economy was taken almost completely out of commission.

Most economists see the U.S. in recession already even though the technical definition is generally two consecutive quarters of negative growth. The fourth quarter of 2019 saw GDP rise 2.1%.

That view is largely because the first-quarter numbers only include a few weeks of the economic shutdown brought about by the coronavirus, and even at that probably underestimate the real damage.