U.S. economic growth has marked a historic plunge due to the spread of infections with the novel coronavirus. The U.S. Congress should come up with additional economic measures as soon as possible to prop up the economy.
The advance estimate of U.S. real gross domestic product for the April-June quarter decreased at an annualized rate of 32.9% from the previous quarter. This was a significantly larger decline than the one posted in the immediate aftermath of the collapse of U.S. investment bank Lehman Brothers, and the worst quarterly drop-off since records began to be kept in 1947.
The United States is the world's largest economic power. The damage to the global economy from its worsened economy is tremendous. The impact of the downturn will have to be monitored closely.
The novel coronavirus pandemic has led to widespread restrictions in the United States on going out, forcing restaurants and retail stores to suspend their businesses. The drop of over 30% on an annual basis in U.S. consumer spending, which accounts for 70% of U.S. GDP, had a great impact. Capital expenditures and exports also fell sharply.
Many predictions expect the U.S. economy to return to positive growth in the July-September quarter, but the infections have been slow to subside and are again spreading in many places. The V-shaped recovery envisioned by the administration of U.S. President Donald Trump will be difficult to achieve.
The economy may stall again if restrictions on going out are tightened further and economic activities stagnate.
The U.S. government has already implemented an economic stimulus package of 3 trillion dollars (about 310 trillion yen). Additional unemployment insurance benefits, one of the main pillars of the package, expired at the end of July. Additional measures will have to be taken.
The concern is that the Republicans and Democrats are at odds in coordinating the contents of additional measures.
The two parties' proposals for measures are far apart in terms of the amount of additional unemployment insurance benefits and the overall amount of money they propose to spend on the measures. The ruling and opposition parties should reach a quick compromise.
The novel coronavirus crisis in the United States has especially been a blow to low-income Americans. This is because many of them work in restaurants and retail stores that have shut down their businesses. The unemployment rate has remained high, at more than 10%. It is important to speed up support for household finances to prevent the division of society from deepening.
The United States is an important export destination for Japan. Especially, automobile-related exports to the United States have been high. However, the number of automobiles exported from Japan to the United States in June plunged by more than 60% compared to the same month last year.
A delay in the recovery of the U.S. market may have a negative impact on employment in Japan's extensive auto industry.
The yen has strengthened against the dollar on the expectation that the U.S. economy will remain stagnant for a lengthy time. The strong yen trend pushes down the earnings of exporting companies.
Europe is also experiencing a serious economic downturn, with the eurozone's real GDP for the April-June quarter decreasing by an annualized rate of 40.3% from the previous quarter. The Japanese government and the Bank of Japan should increase their vigilance of trends in overseas economies and consider appropriate responses.
-- The original Japanese article appeared in The Yomiuri Shimbun on Aug. 3, 2020.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
