US GDP skyrockets by unrevised annual rate of 33.1pc in Q3

27 November, 2020 12:00 AM printer

Washington: The United States registered a spike in its gross domestic product (GDP) in the third quarter, unrevised from the initial estimate.

The Commerce Department said GDP skyrocketed by an annual rate of 33.1 per cent in Q3 after plunging by 31.4 per cent in the second quarter. The unrevised reading on GDP also matched economist estimates, report agencies.

The report said upward revisions to non-residential fixed investment, residential fixed investment, and exports were offset by downward revisions to state and local government spending, private inventory investment, and consumer spending.

The contraction of 31.4 per cent rate in Q2 is the deepest since the government started keeping records in 1947.

Growth estimates for the fourth quarter are below a 5 per cent annualised rate.

Despite encouraging developments on vaccines, spiraling Covid-19 infections as the cold season starts have led economists to sharply downgrade their GDP growth forecasts for the first quarter of 2021.

Goldman Sachs cut its estimate to a one per cent rate from a 3.5 per cent pace. JPMorgan expects GDP to contract at a one per cent pace in the January-March quarter.

But St Louis Federal Reserve President James Bullard sees little risk of a resumed contraction in the economy. While some recent economic data has not been as strong as it had been earlier in the fall, nonetheless “so far I think we’re holding up,” he said on Tuesday. Mr Bullard expects the economy to post above-trend growth in both Q4 and into the first part of 2021.

Labour market momentum was already slowing before the resurgence in coronavirus infections. The government reported early this month that nonfarm payrolls increased by 638,000 jobs in October, the smallest gain since the jobs recovery started in May. That followed 672,000 jobs added in September.

Only 12.1 million of the 22.2 million jobs lost in March and April have been recovered. The number of Americans filing first-time claims for jobless benefits increased further last week, suggesting that an explosion in new Covid-19 infections and business restrictions were boosting layoffs and undermining the labour market recovery.

Initial claims for state unemployment benefits totalled a seasonally adjusted 778,000 for the week ended Nov 21, compared to 748,000 in the prior week, the Labor Department said on Wednesday.

Economists polled by Reuters had forecast 730,000 applications in the latest week.

The weekly claims report, the most timely data on the economy’s health, was published a day early because of Thursday’s Thanksgiving Day holiday.

The US has been slammed by a fresh wave of coronavirus infections, with daily cases exceeding 100,000 since early November. More than 12 million people have been infected in the country, according to a Reuters tally of official data.

The respiratory illness has killed more than 257,000 Americans and hospitalisations are soaring, prompting state and local governments to reimpose a host of restrictions on social and economic life in recent weeks, which could keep claims above their 665,000 peak seen during the 2007-09 Great Recession.

Unemployment claims dropped from a record 6.867 million in March as about 80 per cent of the people temporarily laid off in March and April were rehired, accounting for most of the rebound in job growth over the last six months.