Today’s March quarter GDP result — a decline of 0.3%, seasonally adjusted — is a historical oddity, probably the most meaningless national accounts result in decades.
The real damage of the pandemic will be reported in three months, for the June quarter, and by that stage in September — barring another lockdown — we’ll have a much clearer sense of how the economy is recovering.
The United States has already had its first-quarter estimate — a contraction at an annualised rate of 5% and a precursor to what will be the largest single plunge in GDP so far recorded when the current quarter is reported in coming months.
The US economy was already in a far more parlous state than ours, with Trump — predictably — utterly bungling handling the pandemic, leading to more than 105,000 deaths and counting, and lockdowns prematurely lifted amid tens of millions of unemployed.
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That was before the mass protests and civil unrest triggered by yet another police murder of an African American, the brutal response of US authorities, and the exploitation of the protests by extremists and criminals — including Trump.
There are more important issues at play than economic growth in the US, but the civil unrest sweeping the country ensures the chances of a rapid economic recovery will grow fainter.
Civil unrest causes immediate and long-lasting economic damage — much more so than natural disasters, after which people and businesses rebuild and move on. And chances are the protests will prompt an increase in COVID-19 infection rates too.
To Australia this matters as much as the health of the Chinese economy. Without a US economic recovery, growth elsewhere will be weaker — especially in China where exports are under pressure as surveys of manufacturing show a slide in export orders.
So all eyes will be on coming economic data in the US to determine how bad things were before the riots hit.
The first top tier data report for May is the labour force report on Friday (late Friday night Sydney time). US economists think the unemployment rate surged to 19.8%, smashing April’s record of 14.7%. The actual rate in April, including those on support programs, was 19.4%, so the real rate could be closer to 24%.
That will be after the latest weekly unemployment benefits claims data, which is expected to show another fall to “just” 1.8 million from last week’s 2.1 million, bringing total benefit claimants in recent weeks to 44 million.
Get used to those kind of double-digit numbers — or worse. After the very poor figures on consumer spending and trade for April released last Friday, on Monday the Atlanta Federal Reserve estimated economic output could drop 52.8% in annualised terms in the second quarter. That’s not a typo. It was a little deeper than its previous 51.9% estimate.
It’s not all complete gloom: the May survey of US manufacturing showed a small improvement in the index from 41.5 to 43.1 — but it’s all relative, as it is still in deep contraction territory.
Consumer spending has slumped from previous record lows, with personal consumption expenditure in May falling a record -58.1%, while savings have surged through a combination of lockdowns and US$3 trillion of transfer payments from the federal government in support spending to households.
Private domestic investment growth fell by a record -62.6%, beating the April record of -61.5%. April trade data showed goods exports slumping 25.2% to US$95.4 billion in April, a 10-year low.
The slide was led by a 65.9% collapse in shipments of motor vehicles and parts. Although imports also fell by a nasty 14.3%, the trade deficit widened 7.2% to US$69.7 billion. That will also be a drag on second-quarter GDP because the deficit will not close in May and June.
And remember all of this is before the disruption over the past week as American society melted down. It’s hard to see how the US polity can return to functioning anything like normally while Trump and his merry band of anarchists and white supremacists remain in power.
Herbert Hoover and Andrew Mellon dramatically worsened the Great Depression by refusing to do anything to address the economic and social dislocation that followed the 1929 crash.
Trump and the terrorists who staff his administration are actively trying to make things worse. And the rest of the world will pay for it along with Americans.