- US gross domestic product grew at an annualized rate of 4% in the fourth quarter, the Commerce Department said Thursday.
- Economists surveyed by Bloomberg expected growth to come in at 4.2%.
- The gains come after economic reopening drove a record-high growth rate of 33.1% in the third quarter.
- While the final three months of the year saw skyrocketing COVID-19 cases prompt stricter lockdown measures, holiday-season spending and modest hiring buoyed the economy.
The US economy grew less than anticipated in the last three months of 2020 as the moderating pace of recovery padded against the coronavirus’s dire resurgence.
US gross domestic product grew at an annualized rate of 4% in the fourth quarter, the Commerce Department said Thursday. Barring last quarter’s record leap, the end-of-year gain is the largest since 2014. Economists surveyed by Bloomberg expected growth of 4.2% through the period.
The reading represents how much the economy would have grown had the fourth-quarter pace lasted for 12 months. The Thursday data marks a sharp slowdown from the third quarter’s record 33.1% annualized rate of growth.
The Commerce Department is slated to report two more estimates of fourth-quarter growth in the coming months. The rate shown in Thursday’s data is likely to be revised in future updates.
While the government data reveals a significant slowing in the economic recovery, it still shows the US rebounding through the deadliest wave of the pandemic yet. The last three months of 2020 saw state and local governments impose stricter lockdown measures to curb the virus’s spread. Softer consumer spending and weak service-sector activity suggest the pace of improvement nearly ground to a halt heading into the new year.
“Most or maybe all of that economic growth was packed into October, with November and December growth declining or even reversing into losses,” Robert Frick, corporate economist at Navy Federal Credit Union, said. “The terrible third wave of COVID-19 caused these problems, and thankfully, cases seem to have crested.”
The labour market fared particularly poorly at the end of 2020. The country lost 140,000 payrolls in December, officially paring gains made in months prior as COVID-19 restrictions cut into hiring activity. The unemployment rate held steady at an elevated 6.7%.
All the while, COVID-19 cases in the US leaped to record-highs and prompted fresh economic fallout. Daily case counts edged up against 250,000 near the end of 2020 before falling in the new year. Hospitalizations also peaked and total deaths reached 336,802 through the quarter, according to The COVID Tracking Project.
To be sure, GDP still sits just below pre-pandemic highs.
On the bright side, the country has cleared some hurdles in distributing COVID-19 vaccines. The US completed an average 1.21 million vaccinations per day last week, according to Bloomberg data, outpacing the previous goal of 1 million. Roughly 25.6 million shots have been given so far.
Early indicators also suggest the $US900 billion stimulus package approved in late December is also having a positive effect on growth. Spending leaped year-over-year through the first two weeks of January as stimulus checks and expanded unemployment benefits included in the bill hit households, Bank of America economists said January 22. Stimulus recipients and those earning less than $US50,000 exhibited the largest improvements.
Additional aid could further accelerate growth as early as the current quarter. President Joe Biden continues to push for a $US1.9 trillion measure that includes expanded unemployment benefits, $US1,400 direct payments, and state and local government aid. Democrats have indicated that, while they’d prefer to pass the bill with Republican support, they’re also willing to use budget reconciliation to pass a package.
Senate Majority Leader Chuck Schumer said earlier this week that “time is of the essence” for approving new economic relief. Democrats largely see the mid-March expiration date for boosted unemployment benefits as a loose deadline for legislative action.
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