The U.S gross domestic product (GDP) grew at a record annualized rate of 33.1% in the third quarter (July to September 2020), according to the report from the Commerce Department on Thursday. This largest-ever jump in GDP as the country recovers from the impact of Covid-19 lockdown.
This record growth driven by consumer spending is in direct contrast to the contraction of 31.4% recorded in the Second Quarter of 2020.
The GDP was up 7.4% compared to the previous quarter.
The reading marks the largest output gain in recorded history, based on data going back to the 1940s. It came in roughly double the next-biggest jump seen in 1950. Economists surveyed by Bloomberg expected a 32% gain.
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The data released by the Commerce Department showed that
- Consumer spending grew at an annual pace of 40.7% in Q3, following a 33.2% slump in Q2
- Business investment rose 20.2% in Q3, after a 27.2% fall in Q2
- Exports surged at a 59.7% rate, following a 64.4% slump in the previous quarter.
“The increase in real GDP reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment that were partly offset by decreases in federal government spending (reflecting fewer fees paid to administer the Paycheck Protection Program loans) and state and local government spending.
Personal consumption included spending on healthcare, food services, accommodation, motor vehicles, and parts, clothing, and footwear, according to the BEA.
“The increase in third-quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19.
The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the third quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified” said the BEA
Thursday’s figures although stronger than expected by economists and offset the second Quarter slump, it does not lift the US economy back to its levels before Covid-19
Current‑dollar GDP increased 38.0 percent, or $1.64 trillion, in the third quarter to a level of $21.16 trillion. In the second quarter, GDP decreased 32.8 percent, or $2.04 trillion (tables 1 and 3).
The price index for gross domestic purchases increased by 3.4 percent in the third quarter, in contrast to a decrease of 1.4 percent in the second quarter (table 4). The PCE price index increased 3.7 percent, in contrast to a decrease of 1.6 percent. Excluding food and energy prices, the PCE price index increased by 3.5 percent, in contrast to a decrease of 0.8 percent.
Disposable personal income decreased $636.7 billion, or 13.2 percent, in the third quarter, in contrast to an increase of $1.60 trillion, or 44.3 percent, in the second quarter. Real disposable personal income decreased by 16.3 percent, in contrast to an increase of 46.6 percent.
Personal saving was $2.78 trillion in the third quarter, compared with $4.71 trillion in the second quarter. The personal saving rate—Personal saving as a percentage of disposable personal income—was 15.8 percent in the third quarter, compared with 25.7 percent in the second quarter.
About half of the Americans who lost their jobs in the pandemic remain unemployed.
The weekly initial claims total fell to 751,000 for last week, down from 791,000 a week earlier.
That’s the lowest number of new unemployment support claims since March, but also higher than at any time before 2020.
The recovery also faces risks from soaring COVID-19 case counts. Some countries in Europe have already reinstated lockdowns as coronavirus infection rates and death tolls leap to record highs, leaving some fearing the US could take similar steps.
By; Ifunanya Ikueze
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