US GDP is booming within the third quarter at 33.1%, higher than anticipated
After the worst quarter in history, the U.S. economy grew faster than ever in the third quarter as a nation ravaged by an unprecedented pandemic reassembled, the Department of Commerce reported Thursday.
Third quarter gross domestic product, a measure of the total number of goods and services produced from July through September, rose 33.1% on an annualized basis, according to the department's original estimate for the period.
The profit came after a 31.4% plunge in the second quarter and was better than the Dow Jones polled estimate of 32% by economists. The previous record after World War II was the 16.7% eruption in the first quarter of 1950.
Markets reacted positively to the news, with Wall Street erasing a loss on the stock market and doing mostly positive.
"It is obviously good news that the economy recovered in the third quarter," said Eric Winograd, senior economist at AllianceBernstein. "There's still a lot to be done here, and the pace of improvement … will slow down. The stimulus programs that drove much of the economic boom last quarter have expired or are being phased out. Tax support is waning. That is part of the reason the pace of growth will slow down from here. "
The increased consumption as well as the sales growth in corporate and residential investments as well as in exports led to a recovery in the third quarter. Decline in government spending after the expiry of the CARES law. Rescue financing deducted from GDP.
The rapid pace of growth came after states across the country halted major activities to contain the spread of Covid-19, which the World Health Organization declared a pandemic on March 11.
In the United States, around 228,000 people have died from the virus that infected nearly 9 million people in the country. The economy has been in a technical recession since February, as growth declined 5% in the first quarter.
While the third quarter news was good for the $ 21.2 trillion economy, the U.S. faces a tougher path as coronavirus cases rise and concerns about its health and economic impact mount. Nearly half of the 22 million jobs lost in March and April remain unfilled, and the unemployment rate remains at 7.9%, more than double what it was before the pandemic, with 12.6 million Americans still unemployed.
The GDP release came just five days before election day, which culminates in a heated battle between President Donald Trump and his Democratic challenger, former Vice President Joe Biden. Trump has promised a return to pre-pandemic strong growth, while Biden has accused the Republican incumbent of ditching a thriving economy due to mismanagement of the virus.
"This is being taken up by both ends of the political spectrum as evidence of the strength of the economic recovery after the lockdown or as a fleeting warning that profits could be short-lived," said James McCann, senior global economist at Aberdeen Standard Investments. "The reality is that the GDP numbers show that the US economy did indeed rebound strongly when the lockdown was lifted."
In a tweet, Trump noted the GDP figure "biggest and best in our country's history" and said growth in 2021 would be "AWESOME !!!"
For his part, Biden noted that while the economy had improved, "visits to food banks have not slowed and poverty has grown".
The growth in the third quarter came amid a revival in consumer activity, which represents 68% of GDP. Although most of the country continued to reopen cautiously, shoppers returned to stores and the bar and restaurant industry entered the first lukewarm period of business resumption despite capacity constraints.
Personal consumption increased by 40.7%, while private gross inland investment increased by 83%, while on the housing side it increased by 59.3%.
According to Ian Shepherdson, chief economist at Pantheon Macroeconomics, the headline remains "spectacular," but at the end of 2019 growth is still 3.5% below the level. Shepherdson expects consumer and business investment to rebound, which has resulted in the third quarter "rising much less rapidly" in the last three months of the year.
"With no new impetus and as Covid infections are spreading quickly, we are sticking to our forecast of 4% growth in the fourth quarter, although the error rate here is high at this point in time," he added.
Economic activity in the real estate sector has been strong and surveys of consumers and business leaders showed that confidence has remained high despite virus-related setbacks.
Personal income fell sharply in the quarter as coronavirus relief transfers waned. Personal savings also fell, but remained strong at a rate of 15.8% compared to a record high of 25.7% in the second quarter.
The annualized metric indicates how much GDP would grow over the course of a year at the current rate at the same level as a year ago. In terms of the year-on-year percentage change, the economy contracted 9% in the second quarter and 2.9% in the third quarter.