US economy demonstrates historic growth in the third quarter
The U.S. economy grew at a record pace in the third quarter, thanks to more than $ 3 trillion in government stimulus to help the pandemic, spurring consumer spending, but it could take a year or more to heal the deep scars of the COVID-19 recession.
Although the Commerce Department’s report on Thursday’s gross domestic product, which is one of the last major economic indicators ahead of next week’s presidential election, already making its way into future history textbooks, it is unlikely to be able to ease the devastating blow to society that the coronavirus pandemic has inflicted on tens of millions of still unemployed Americans and more than 222,000 dead.
Five days before the election, the president Donald Trump, lagging behind in most nationwide opinion polls to its Democratic rival is likely to use impressive GDP growth as a sign of economic recovery.
In his tweet, Trump noted «the largest and best indicator in the history of our country» and said that growth in 2021 will be «FANTASTIC !!!»
But production remains below Q4 levels 2019, which the presidential candidate will almost certainly highlight Joe Biden, as well as other signs that a growth spurt may diminish quickly.
Biden tweeted that while the economy has improved, «food bank visits have not decreased and poverty has increased».
Gross domestic product rose 33.1% year-on-year in the last quarter, the Commerce Department said Thursday in its preliminary estimate. These were the highest rates of economic growth since the government began keeping records of this indicator in 1947, but it should also not be forgotten that Q2 saw a historic GDP contraction of 31.4%.
The U.S. economy grew at its fastest pace ever in Q3—Three experts break down what it means
On an annualized basis, GDP jumped 7.4% in the last quarter after falling 9.0% between April and June. Production volume is 3.5% below the level of the fourth quarter. This recovery cut roughly two-thirds of the fall in GDP in the first half of 2020.
Economists polled by Reuters forecast the economy to grow 31% in July-September. Economy plunged into recession in February.
The government stimulus package for the economy has become a lifeline for many businesses and the unemployed, increasing consumer spending, which in itself has led to GDP growth..
But government funding has been depleted and no deal on a new stimulus package is expected anytime soon. New COVID-19 cases on the rise across the country, prompting new restrictive measures for businesses like restaurants and bars.
Personal income fell $ 540.6 billion in the third quarter after rising $ 1.45 trillion in the second. The decline in income was associated with a reduction in government transfers associated with pandemic assistance programs. As labor market recovery slows, outlook for consumer spending is dim.
Just over half of the 22.2 million jobs lost during the pandemic have been recovered, and layoffs continue..
US stock index futures jumped on GDP data. The dollar rose against a basket of currencies. Prices for US Treasuries fell.
A separate Labor Department report on Thursday showed that 751,000 people applied for state unemployment benefits in the week ending October 24, up from 791,000 in the previous period. While filings fell from a record 6,867 million in March, they still exceed the 665,000 peak recorded during the 2007-2009 Great Recession..
Consumer spending, which accounts for more than two-thirds of the US economy, rebounded at a historic rate of 40.7% in the third quarter, driven by purchases of goods such as cars, clothing and shoes. Service costs rose, although remained below Q4 levels.
Spending was boosted by billions of dollars in government transfers, including a $ 600 weekly unemployment subsidy and a $ 1,200 one-time check in relief households.
The shift towards spending on goods triggered an increase in imports, which led to an increase in the trade deficit. However, some of the imports remained in warehouses. Stockpiling Compensated for Trade Shock on GDP Growth.
After difficulties The second quarter also saw a positive shift in business investment, but economists believed the growth would be temporary as demand for goods that do not complement the lifestyle changes brought about by COVID-19 remains weak. The pandemic also led to a drop in oil prices, which severely let down the oil and gas industry..
Boeing Co reported its fourth consecutive quarterly loss on Wednesday and announced that it is now expected to cut approximately 30,000 workers, nearly double the original target for the company’s nearly 130,000 global workforce by the end of 2021..
The housing market has become another shining star thanks to historically low interest rates. The sector has seen strong economic activity, and surveys of consumers and business leaders have shown that the level of economic confidence remains high, despite the difficulties due to the coronavirus pandemic..