The U.S. economy, largely shut down by the coronavirus pandemic, turned in its worst performance in more than a decade early this year but the dismal showing reflects just a sliver of the damage to come.

The nation’s gross domestic product, the value of all goods and services produced in the U.S., contracted at a seasonally adjusted annual rate of 4.8% in the January-March period as both consumer and business spending fell sharply, the Commerce Department said Wednesday. It marked the first drop in output since early 2014 and the steepest since late 2008 during the depths of the Great Recession.

Economists surveyed by Bloomberg had forecast a 3.8% decline in GDP.

Stock investors looked past the report with all three major indexes up more than 1.5% in morning trading, around 10 a.m., instead focusing on positive results from a trial of a potential treatment for coronavirus. Federal Reserve policymakers are expected to provide more insight into the state of the economy Wednesday afternoon after it concludes a two-day meeting.

The country almost certainly is already mired in a deep – though likely short – recession, hastily ending the record 10½ -year-old expansion..

The first-quarter contraction likely reflects only part of the actual slide because initial estimates typically miss some data and such gaps are accentuated during big economic shifts, Goldman Sachs says. Also, the firm says, many businesses were closed and couldn’t be surveyed.

The economy was performing solidly in the first quarter until most states began closing down nonessential businesses such as restaurants, malls, movie theaters and sports venues in mid-March to curtail the spread of the virus. The closures compounded the pain reverberating through a travel industry that had come to a near standstill as Americans shunned airplane flights and hotel stays.

Moody’s Analytics estimates that about 30% of America’s economy is shuttered.

About 10 million Americans in industries affected both directly and indirectly lost their jobs in March, further dampening consumer spending in the first quarter.

"The scale of the hit to economic growth is shocking," Contingent Macro Research wrote in a research note about a first-quarter pullback whose main affects didn't come until the last two weeks of the period.

By May, as many as 25 million Americans will have been laid off and another 20 million or so will see reductions in hours or wages, Moody’s estimates. The unemployment rate, which rose from a half-century low of 3.5% in February to 4.4% in March, is expected to climb to 15% to 20% in April, Moody’s predicts, the highest since the Great Depression.

As a result, most of the economic fallout from the layoffs and businesses closures is playing out in the current quarter. Economic output is expected to shrink at a 24.5% annual rate in the current quarter, according to economists surveyed by Wolters Kluwer’s Blue Chip Economic Indicators. Research firms such as Nomura expect upwards of a 40% drop, the most since the 19th Century.

Congress has passed about $3 trillion in programs to minimize the damage. Among other measures, lawmakers have boosted unemployment benefits and eligibility and offered forgivable loans that cover eight weeks of payroll and other costs for businesses with fewer than 500 employees that retain workers. The Federal Reserve also has rolled out a batch of programs to support lending to businesses and households.

Analysts, in turn, expect the economy to begin to rebound by summer, assuming the coronavirus outbreak continues to wane and more states allow businesses to reopen. States such as Georgia, South Carolina and Tennessee already are restarting their economies.

Economists surveyed by Wolters Kluwer expect the economy to grow about 7.5% in the second half the year and 3.8% in 2021. Even so, many consumers are expected to remain wary and avoid public gathering spots until a vaccine is available, perhaps in a year or so. The economists surveyed don’t expect the economy to return to its pre-pandemic level until late 2021.

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Consumer spending plunges

Consumer spending tumbled 7.6% — the biggest drop in 40 years — after rising 1.8% in the fourth quarter. American shoppers were in good financial shape before the outbreak after whittling down debt and socking away a historically large share of their income.

But the sudden shutdown of most consumer service businesses combined with millions of layoffs has abruptly shriveled purchases. Consumer confidence, which can foreshadow spending, fell sharply April to the lowest level since 2014, the Conference Board said Tuesday.

Consumption makes up about 70% of economic activity.

Business investment declines sharply

Business investment fell 8.6% after a 2.4% decline in the fourth quarter, marking the first time since 2009 such outlays have fallen four straight quarters. Companies already were restraining their spending amid President Trump’s trade war with China last year.

Any increased optimism following the Phase 1 trade deal between the U.S. and China in January has been doused by the pandemic. There’s no reason for businesses to buy new factory equipment and computers to ramp up production if consumers aren’t spending.

Purchases of such equipment plummeted 15.2% while spending on structures dropped 9.7%, in part because of the crash in oil prices that has prompted producers to shut down drilling rigs.

Business stockpiling pulls back

Companies added to inventories at a far slower pace, subtracting about a half a percentage point from growth. Many firms beefed up their stocks in early 2019 in a bid to dodge Trump’s tariffs on Chinese imports, reducing the need to replenish those supplies. The coronavirus has further dampened stockpiling, with customer demand down substantially. Inventories have been a drag on growth for four straight quarters.

Residential investment soars

Construction of new single-family homes and apartments, along with renovations, surged 21% after a 6.5% increase the prior quarter. Such spending has risen three straight quarters, breaking a string of six straight quarterly declines. Average 30-year fixed mortgage rates have fallen to 3.3% from 4.2% a year ago, sparking home purchases and construction. That has helped offset a shortage of labor and available lots that have constrained builders.

But home construction is expected to fall in the coming months because of the pandemic.

Trade bolsters growth

A narrower trade gap added to growth but not for any good reasons. U.S. exports fell 8.7% but imports plunged at nearly twice the rate -- 15.3% -- because of both supply chain disruptions in China and softer demand from American consumers.

Government outlays increase

Federal, state and local spending increased 0.7%, following a 2.5% rise in the fourth quarter. Federal outlays rose 1.7% and should be a much bigger contributor to growth in the second quarter in light of the massive stimulus spending in response to the economic effects of the outbreak.

The bottom line

This was a grim report but it simply reflected the early fallout from the pandemic, with the worst damage expected in the current quarter. Over the course of the recession, the economy is likely to contract 12% -- three times the size of the drop during the Great Recession, says economist Gregory Daco of Oxford Economics.

That downturn, however, lasted 18 months while the current slump is expected to wreak havoc the first half of the year before a recovery begins in the third quarter.