US economy shrinks at fastest rate since 2008

The US has tried to cushion the economic blow with nearly $3tn (£2.4tn) in new spending, including direct payments to many families.

The Federal Reserve has also taken with a slew of emergency steps, including lowering interest rates to near zero.

On Wednesday, Federal Reserve Chair Jerome Powell said the bank would maintain those levels until it was “confident that the economy has weathered recent events and is on track”. But he warned that the ongoing crisis would “weigh heavily” on the economy.

“Will there be a need to do more? I would say the answer to that will be a yes,” Mr Powell said at a virtual press conference.

‘Unprecedented’ shock

Since mid-March, more than 26 million people in the US have filed for unemployment, and the US has seen historic declines in business activity and consumer confidence. Forecasters expect growth to contract 30% or more in the three months to June.

“This is off the rails, unprecedented,” said Mark Zandi, chief economist at Moody’s Analytics. “The economy has just been flattened.”

The contraction in the US economy is part of a global slowdown as a result of the coronavirus pandemic.

In China, where restrictions were in place for much of the quarter, the economy shrank by 6.8% – its first quarterly contraction since record-keeping began in 1992.

And on Wednesday, Germany said its economy could shrink by a record 6.3% this year.

“We will experience the worst recession in the history of the federal republic” founded in 1949, Economy Minister Peter Altmaier said.