GDP Rose 4% In The Fourth Quarter As The Economy Struggled To Creep Back From The Brink

Topline

U.S. gross domestic product grew at an annualized rate of 4% in the fourth quarter, according to new data released by the Commerce Department Thursday—slightly less than what economists were expecting and a sharp contraction from the previous quarter, when GDP grew at 33.4% on an annualized basis—as the economic rebound lost steam amid a winter surge in Covid-19 cases and the expiration of federal pandemic rescue legislation.

Key Facts

Consumer spending fell sharply during October, November, and December as the virus continued to spread and businesses closed, but spending on manufacturing and housing picked up to offset some of those losses.

That drop in spending is also related to stubbornly high unemployment levels, which have improved from the early days of the pandemic but remain incredibly elevated by historical standards.

Big Number

3.5%. That’s how much the U.S. economy contracted in 2020, the commerce department said.

Crucial Quote

“The report reflects an economy still dictated by the pandemic playbook – one of the larger contributors to Q4 GDP was healthcare spending, while restaurants and food service were a notable detractor due to renewed COVID-19 restrictions across the country,” Glenmede investment strategy officer Michael Reynolds said. 

What To Watch For

Experts are expecting economic activity to pick back up again in the second half of 2021 as the $900 billion stimulus package signed into law at the end of December takes effect and the national vaccination effort ramps up. Analysts from Goldman Sachs said last week that they’re predicting GDP to grow 6.6% this year, but noted that the virus still poses considerable risks to that recovery.

Further Reading

Unemployment Claims Fall Slightly As Biden Administration Pushes Vaccines, Stimulus (Forbes)

Here Are The Biggest Risks To Derail An Economic Recovery In 2021, Goldman Sachs Warns (Forbes)

Comments are closed.