Consumption by US citizens fell significantly in the second quarter of 2020

US-Consumers are not in the mood to spend money, at the moment, statistics say. Photo from Las Vegas. Source: Kartin Blank, Kristina Speicher

The US Department of Commerce has estimated -33.2%, but according to statistical methods common elsewhere in the world this was “only” -9.5%

Consumption by US citizens fell considerably in the second quarter of this year. According to the US Department of Commerce’s preliminary figures, real gross domestic product (GDP) fell by (-)32.9% between April and June 2020. The figures were provided by the Bureau of Economic Analysis (BEA).

However, the figure of (-)32.9% is misleading: if you calculate the data according to statistical methods used elsewhere in the world, the decline is “only” (-)9.5% (see at the bottom).

In the 1st quarter of 2020, the decline had been (-)5%, according to the Department of Commerce.

The US economy’s Real GDP since 2016: percent change from preceding quarter.

On its webpage, the Bureau of Economic Analysis gives reasons for the decline: “The decrease in real GDP reflected decreases in personal consumption expenditures (PCE), exports, private inventory investment, nonresidential fixed investment, residential fixed investment, and state and local government spending that were partly offset by an increase in federal government spending.”

In the USA, 70% of GDP is based on private consumption.

In contrast to the decline in consumption, the US citizens’ income rose in the second quarter: “Disposable personal income increased $1.53 trillion, or 42.1 percent, in the second quarter, compared with an increase of $157.8 billion, or 3.9 percent, in the first quarter. Real disposable personal income increased 44.9 percent, compared with an increase of 2.6 percent..”

However, citizens were reluctant to spend money because of current uncertainties: “Personal saving was $4.69 trillion in the second quarter, compared with $1.59 trillion in the first quarter. The personal saving rate – personal saving as a percentage of disposable personal income – was 25.7 percent in the second quarter, compared with 9.5 percent in the first quarter.”

Bureau of Economic Analysis

Note: the -33.2% was calculated as a so-called “annual rate”. They would only become real if the same declines were to occur in the following quarters, international news agencies reported.

(31.07.2020, USA: 07.31.2020)