US economy in 2020: Worst shrinkage since 1946


Considering the whole year of 2020, the American GDP reduced by 3.5% compared with 2019. That is the worst shrinkage in the US Economy since the end of the Second World War.

As economists had predicted, the annual and seasonal growth rate was 4% in the last quarter of last year. If the economic scenario was different, a 4% growth would be great. However, such growth did not compensate for the historical damages of the first and second quarters. Thus, the situation in the United States before the pandemic is farther away.


After all, it has been at least ten years of somewhat economic stability. In comparison, the last time the American GDP declined was in 2009 in the midst of the financial crisis, when its numbers fell to 2.5%. But the shock of the pandemic, at the beginning of last year, took the GDP to a record shrank of 31.4% on an annual basis in the Spring months. It ended up hampering the economic recovery of the United States.

What is next for the US economy after the worst shrinkage?

Even though the new year brought some hope of a new beginning, a full recovery is not here yet. It is true that vaccination is to contain contagion and deaths due to the virus. However, the crisis is not over yet and the consequences may last longer than expected.

worst shrinkage
Find out the main information about the worst shrinkage in the US Economy since the end of the Second World War. (Image: Freepik/ Starline)

In the ending quarter of 2020, the American economy saw growth in some areas, such as consumer spending and business investments. In this way, GDP growth is slow, but important. But that does not mean that many problems are still unsolved. Disposable income dropped by 9.5% on an annual base at the end of 2020, for example.

A few more barriers to better numbers

In addition, people are saving money. The personal saving rate is at an elevated 13.4%, which is not ideal in an economy maintained by personal spending. The situation is complicated by the slowdown in the benefits of relief programs. But the new administration promises positive changes.

All things considered, the first three months of 2021 are probably going to remain at a similar pace to the end of 2020. But PNC chief economist Gus Faucher says that things are looking more optimistic with the continued vaccine rollout and better weather for consumers to venture outside. While it will take time for the US economy to recover from this worst shrinkage, many are optimistic that numbers will be better this year. See more news on our website!


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