US economy shrank by 4.8 percent in first quarter

Meat is sold at a shop in Chicago, Illinois, the United States

Economists surveyed by Refinitiv had expected the first estimate of GDP to show a 4 percent decline.

Gross domestic product, the broadest measure of goods and services produced across the economy, fell at a seasonally adjusted annual rate of 4.8 percent in the three-month period from January through March, the Commerce Department said in its first reading of the data Wednesday.

It was the first drop recorded since the first three months of 2014, and the worst since the first quarter of 2009, when the economy contracted by 4.4 percent in the midst of the financial crisis.

Still, the severity of the coronavirus-induced downturn will be reflected more accurately in the second quarter, when the nation’s economy came to a near standstill to mitigate the spread of the virus. Estimates vary widely — Goldman Sachs forecast a decline of 34 percent — but economists agree it’ll be grim, possibly surpassing the worst of the Great Depression.

"The awful headline number is even worse when you consider that the first two months of the first quarter were relatively normal and this number only includes the March lockdowns," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

"Given that the full lockdowns continued through April and most states are likely to continue at least partial lockdowns through May, that leaves June as the only month in the second quarter that may see a possible return to normalcy," he added.

The report likely solidifies economists' belief that the coronavirus has pushed the U.S. into a recession. Officially, a recession does not occur until an economy experiences two consecutive quarters of negative growth.

In the past five weeks, the number of American workers filing first-time claims for jobless benefits surged to 26 million, indicating the unemployment rate is close to 16 percent, significantly higher than it was during the worst of the Great Recession.

Consumer spending -- which typically comprises about two-thirds of total GDP -- plunged 7.6 percent in the quarter as states mandated businesses deemed nonessential to close and directed residents to stay at home. Business investment tumbled 8.6 percent.

The government has attempted to dull the economic pain inflicted by the virus outbreak with four stimulus packages, including the $2.2 trillion CARES Act — the largest in recent memory — signed into law at the end of March.

Later on Wednesday, the Federal Reserve, after its two-day meeting, will offer its latest assessment of the state of the economy and could provide additional guidance on how it plans to foster a recovery in the U.S.

The U.S. central bank has aimed its full firepower at the economy, including slashing interest rates to near zero, launching crisis-era lending programs to bolster spending and making massive purchases of Treasury securities.