GDP posts alarming drop. When the GDP drops, ultimately tax revenue goes down due to less businesses bringing in money and the IRS having a lower tax base. The U.S. economy shrank at a 5% rate in the first quarter, with a much worse decline expected in the current three month economic period, which will show what happened when the pandemic began spreading across the U.S. The Commerce Department reported that the decline in the gross domestic product, the total output of goods and services, in the January thru March quarter was unchanged from the estimate made a month ago. the 5% drop was the sharpest quarterly decline since an 8.4% fall in the fourth quarter of 2008 during the depths of worst financial crisis since the Great Depression. The first quarter period captured just two weeks of the shutdowns that began in many parts of the country in mid-March. GDP posts alarming drop.

Economists believe that GDP plunged around 30% from April through the end of this month. That would be the biggest quarterly decline on record, three times bigger than the current record-holder, a 10% drop in the first quarter of 1958. Forecasters believe the economy will rebound in the second half of the year. The Congressional Budget Office is predicting a 21.5% growth rate in the upcoming July-September quarter followed by a 10.4% gain in the fourth quarter. However, a handful of states, particularly in the South, have begun to report surging infections. And even with a rebound in growth if it does materialize in July, it would come after seismic losses that would mean a decline in economic output for the entire year. While the overall GDP figure was unchanged for the first quarter, the composition shifted slightly with downward revisions to consumer spending, exports and business inventories offset by an upward revision to business investment.

The report was the government’s third and final look at the first quarter GDP. The panel of economists who ave the job of declaring U.S. recessions announced on June 8th that the country had entered a downturn in February, ending the longest economic expansion in U.S. history, 128 months of uninterrupted growth that had begun in June of 2009 following the downturn that triggered the 2008 financial crisis.