Did GDP Fall by One-Third?
In their reporting on the Bureau of Economic Analysis's (BEA) second quarter Gross Domestic Product (GDP) report, several news outlets have used the headline 32.9 percent real GDP decline in the report to say that the economy fell by that much during the second quarter. This claim lacks context because the BEA reports the annualized growth rate, which extends the current quarterly trend over an entire year, when the quarterly decline of 9.5 percent actually indicates how much the economy shrank between the first and second quarter.
The economy is very volatile and won't continue to shrink at the same pace, so the 32.9 percent figure that shows what would happen if the economy kept falling at the same rate is not particularly informative. The economy will not be seeing further public health restrictions equivalent to the ones in March and April, so the drop in annual GDP will be less than the second quarter's.
Regardless of which measure one focuses on, the second quarter represents the largest quarterly GDP decline on record going back to 1947. The annualized decline of 32.9 percent exceeds by a wide margin last quarter's GDP decline of 5 percent, the Great Recession's largest decline of 8.4 percent, and the previous high decline of 10 percent in the first quarter of 1958. In addition, the single-quarter decline of 9.5 percent is nearly two and a half times larger than the entire GDP decline during the Great Recession, which was 4 percent.