(AmericanProsperity.com) – America’s economy is teetering on the edge. The gross domestic product (GDP) fell dramatically, exposing how deep the damage is as COVID-19 continues to wreak havoc. Home sales tanked markedly in March, and, for the first time in many years, long lines developed outside of food banks.
Last week, unemployment rose to a whopping 26.5 million. In mid-March, states began implementing stay-at-home orders and shut down non-essential businesses to prevent COVID-19 from spreading. With state economies shut down and people hurting financially, the federal government passed four different stimulus bills. One included a $1,200 per person direct payment for those who qualified. Congress and the president are considering a fifth stimulus that could consist of more direct payments to Americans who have limited or no sources of income during this crisis.
Q1 GDP Collapses
GDP is a measure of economic growth that considers the total market value of the goods and services produced during a specific period of time. GDP consists of consumption (or consumer spending), investment, government spending, and net exports.
In Q4 of 2019, the economy was humming along at a stable 2.1% growth rate. Even with robust economic activity in January, February, and part of March, the two-week shutdown at the end of March tanked GDP to -4.8% for the 1st quarter of 2020.
The largest tugs on the economy were consumer spending, non-residential fixed investment, exports, and inventories. Consumer spending accounts for 67% of total GDP. It tanked 7.6% as retail stores and restaurants remained closed. Q2 of this year is expected to be significantly worse as the economic shutdown looms for weeks or even months.
Home Sales Plunge
In March, home sales plunged nearly 21% as people pulled their homes off the market or state governments didn’t allow transactions to close. Home inventories were already experiencing shortages, and in March, supplies hit a record low. According to the National Association of Realtors (NAR), pending home sales dropped 20.8% compared with February and were 16.3% lower annually. Regionally, in March, home sales fell 14.5% in the northeast, 22% in the midwest, 19.5% in the south, and 26.8% in the west.
Food Banks See Increase in Demand and Closures
Due to record high unemployment numbers, people are turning to food banks to help them as they struggle to put food on the table. According to Feeding America, an organization representing over 60,000 food banks, demand has risen for 98% of its members. It says that banks are reporting a 70% increase in need.
At the same time, new protocols for dealing with the public and food handling have put a significant burden on food banks. Operating costs have soared, and uncertainty is forcing food banks to close at a time when the public needs them the most. In recent weeks, nearly a third of food banks across the nation closed. For those that remain open, they see a decrease in the number of food donations. Some are using large portions of their budgets to purchase food to continue providing for those in need.
It’s expected that many people will be struggling financially for some time. Food banks hope to be there for them until everyone can get back on their feet. However, the state of the food supply is concerning if this crisis continues as it currently is for another few months. While the government is trying to do its part, it’s questionable if it will be enough to keep America’s economy from going over the cliff in Q2.
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