U.S. real gross domestic product (GDP) decreased at an annual rate of 4.8 percent in the first quarter ended March 31, a greater decline than some forecasts, according to the advance estimate released Wednesday by the Bureau of Economic Analysis (BEA).
By comparison, real GDP, adjusted for inflation, increased 2.1 percent in the fourth quarter of 2019. The decline in first quarter GDP was due in part to the response to the spread of COVID-19, BEA said, as state and local 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 agency said the full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter because the impacts are generally embedded in source data and cannot be separately identified.
The decrease in real GDP in the first quarter reflected negative contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports and private inventory investment. These were partly offset by positive contributions from residential fixed investment, federal government spending, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased.
The decline in PCE reflected decreases in services, led by health care, and goods, led by motor vehicles and parts. The decrease in nonresidential fixed investment primarily reflected a decline in equipment, led by transportation equipment. The decrease in exports primarily reflected a decrease in services, led by travel.
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Non-adjusted current‑dollar GDP fell 3.5 percent, or $191.2 billion, in the first quarter to a level of $21.54 trillion. By comparison, fourth-quarter GDP increased 3.5 percent, or $186.6 billion.
The price index for gross domestic purchases increased 1.6 percent in the first quarter, compared with an increase of 1.4 percent in the fourth quarter. The PCE price index was up 1.3 percent compared with an increase of 1.4 percent in the previous quarter. Excluding food and energy prices, the core PCE price index increased 1.8 percent, compared with an increase of 1.3 percent in the fourth quarter.
Current-dollar personal income increased $95.2 billion in the first quarter compared with an increase of $144.1 billion in the fourth quarter. The deceleration was more than accounted for by a slower pace of compensation that was partly offset by an acceleration in personal current transfer receipts.
Disposable personal income (DPI), considered a barometer for retail sales, increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3 percent, in the fourth quarter. Real DPI increased 0.5 percent, compared with an increase of 1.6 percent in the prior period.
Personal outlays decreased $253.5 billion in the first quarter, after increasing $118.8 billion in the previous three months. The decrease was mainly accounted for by a decline in PCE.
Personal saving was $1.6 trillion in the first quarter compared with $1.27 trillion in the fourth quarter. The personal saving rate–personal saving as a percentage of DPI–was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.
IHS Markit estimated earlier this month that GDP would decline at a 3.5 percent annual rate in the first quarter and predicted a 26.5 percent annualized drop in the second quarter, bringing it to Great Depression levels and culminating in a 2020 growth rate of negative 5.4 percent year-over-year.