GDP dropped -4.8% in the first estimate for Q1, following a 2.1% increase in 2019 Q4, with a technical note citing drops in demand due to the COVID-19 pandemic. Consumer spending dropped -7.6% vs +1.8% the previous quarter, with drops for durable goods (-16.1%) and services (-10.2%) offset by an increase in nondurable goods (+6.9%) spending. Nonresidential fixed investment dropped -8.6%, but was offset by a +21.0% increase in residential fixed investment, keeping overall fixed investment to a -2.6% drop. Government spending slowed to a +0.7% increase for the quarter, after a +2.5% rate in the previous quarter, as the federal government slowed defense spending to a +0.8% increase and pushed nondefense spending up by +3.1%. State and local government spending slowed to a +0.1% increase for the quarter.

The Federal Reserve held the prime rate to a 0.0% - 0.25% range, and expects to keep that range in effect until an economic recovery is well underway. They also said they would continue to purchase Treasury and mortgage backed securities in order to support the flow of credit to households and businesses. In a statement following the announcement, Federal Reserve Chairman Powell said that the severity of the downturn would depend on how quickly the virus was brought under control, and on government actions taken to “cushion the blow” and support the recovery. Chairman Powell also noted that the Federal Reserve’s role was limited to lending money, and that more direct support to people, businesses, and communities could make a critical difference in limiting long lasting economic damage.

In March, consumer spending was down -7.5% compared to February as services spending dropped by -$829.9 billion and goods spending dropped by -$104.9 billion. The decrease in goods spending was led by motor vehicles, and offset somewhat by an increase in spending for at-home foods and beverages. Prices dropped -0.3% overall, and core prices, excluding foods and energy, were down -0.1%. On a yearly basis, core inflation fell from a 1.8% rate to 1.7%, but overall inflation was down from 1.8% to 1.3% due to significant drop in energy costs (-6.1%). Wages were down -2.8%, and proprietors’ income was down -8.2%, but personal current transfer receipts, which include government benefits, were up +1.6%, limiting the overall personal income loss to -2.0% for the month. Personal savings rose from $1,345.3 billion to $2,168.9 billion, as the percent of savings as a percent of disposable income rose from 8.0% to 13.1%.