U.S. GDP grew 33.1% in the third quarter, vs 32% estimate
Growth of the US economy in the third quarter exceeded expectations
Growth in consumer spending also turned out to be higher than expected
In the wake of the anti-crisis aid, the US economy grew at a record pace in the third quarter, the government confirmed on Tuesday. However, by the end of the year, growth seems to have slowed down amid worsening epidemiological conditions and depleted fiscal stimulus..
Economy plunged into recession in February and remains 3.4 percent below end-2019 levels.
In connection with the increase in the incidence of coronavirus, the authorities of states and municipalities began to restrict the activities of enterprises, which led to a reduction in consumer spending and provoked a new wave of layoffs. The situation is aggravated by the fact that Congress for a long time could not accept a new package of economic aid.
The Commerce Department’s third estimate showed that gross domestic product grew 33.4 percent year over year in the last quarter. The figure was revised slightly upward from the previous month, when a 33.1 percent increase was reported. Consumer and business spending was higher than previously thought.
In the second quarter, GDP contracted by 31.4 percent, the highest on record since 1947. Economists surveyed by Reuters expected third-quarter figure to remain at 33.1 percent.
Twenty-one industries, led by the automotive sector, boosted GDP growth in the last quarter. The only sector lagging behind was mining.
On Monday, Congress approved a new aid package worth about $ 900 billion. Although the additional stimulus will provide some amortization, economists believe that these measures are not enough and they were taken too late..
American financial markets almost did not react to the news of the revision of GDP growth.
Consumer spending, which accounts for more than two-thirds of US economic activity, rose 41 percent in the last quarter, up from 40.6 percent as previously reported..
Subsequently, however, consumption appears to have declined: retail sales fell in October and November as household incomes declined due to the expiration of federal unemployment benefits..
The number of initial applications for unemployment benefits reached a three-month high. Due to the tense situation on the labor market and the decline in household income, GDP growth forecasts for the fourth quarter are about 5 percent. Most economists expect moderate growth or even contraction in the first three months of 2021.
Business expenses for the third quarter were revised from 21.8 percent to 22.9 percent due to significant investments in equipment. However, non-residential spending has declined for the fourth consecutive quarter.