US economy shrinks by 4.8% with worse to come, warn experts

The US economy shrank by 4.8 per cent in the first quarter, with experts warning that worse is to come as the coronavirus pandemic brings the world’s largest economy to a halt.

The contraction in GDP between January and March exceeded most analysts’ expectations and marked the biggest quarterly decline since the financial crisis a decade ago.

The fact that the pandemic only began shutting businesses in the second half of March also pointed to the depth and breadth of the economic crisis now gripping the United States.

A much bigger decline is expected in the second quarter.

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The Federal Reserve left interest rates at close to zero as expected. But Fed chairman Jay Powell said that the effects of coronavirus on the economy would be "severe".

The concern about the US economy comes as the Trump administration is scrambling to change the rules governing the distribution of rescue loans to small businesses, after it emerged that several major corporations including the LA Lakers basketball team and large restaurant chains like Shake Shack had qualified for the loans included in last month’s $2.2 trillion package.

Several of these firms have since refunded the money, but officials are now trying to ensure that similar problems to do not beset the allocation of a second round of loans agreed by Congress last week. Businesses also reported difficulties this week accessing the website, with some applicants getting locked out of the online system.

Possible treatment

With more than a million cases of Covid-19 now reported in the US, there was some welcome news for coronavirus patients as pharmaceutical company Gilead announced positive results for its drug remdesivir as a possible treatment for the virus.

Speaking in the White House, top immunologist Dr Anthony Fauci said the news was "very positive", noting that the drug has a "clear-cut, significant positive effect in diminishing the time to recover". Officials said it is possible that the Food and Drug Administration (FDA) could move to approve the drug's use for Covid-19 treatment swiftly.

But a conflicting study – accidentally leaked by the WHO last week – showed that the drug had no impact on patients in a trial in China.

‘Tough love’

More than 53,000 deaths have now occurred in the United States due to coronavirus. On Wednesday, New York reported 330 new deaths, in line with previous days, while neighbouring New Jersey reported 329, a jump on recent days. Nonetheless, New Jersey's governor Phil Murphy announced plans to reopen the state's parks while maintaining social distancing rules.

New York City mayor's Bill Blasio found himself at the centre of controversy after he personally oversaw police disbanding a Hasidic Jewish funeral in the Williamsburg area of Brooklyn on Tuesday, and later chastised the community for not observing social distancing rules.

He apologised for the tone of his remarks on Wednesday. “I regret if the way I said it in any way gave people a feeling of being treated the wrong way, that was not my intention. It was said with love, but it was tough love,” he said.