US GDP expanded an annualized 4% in the last quarter of 2020, slowing from a record 33.4% expansion in the third quarter as the continued rise in COVID-19 cases and restrictions on activity moderated consumer spending. Figures came in line with analysts' expectations. The number reflected "both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States" according to the BEA
Considering full 2020, Real GDP decreased 3.5% (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2% in 2019). It was the sharpest contraction since 1946 but slightly less than forecasts of a 3.6% drop. Government spending, business and housing investment remained robust, however consumer spending, exports, inventory investment decreased. Imports, a subtraction in the calculation of GDP decreased.
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Open real account TRY DEMO Download mobile app Download mobile appWhen it comes to the Q4 print, Personal consumption rose at 2.5%, missing analysts' expectations of 3.1%; Core PCE rose at 1.4%, above 1.2% projections and the broader price index rose at 2.0%, below market estimates of 2.2%. Disposable personal income which measures the inflow of government stimulus funds and number of job losses fell 9.5% in Q4 compared to 16.3% contraction in the previous quarter.
US real GDP growth. Source: Oxford Economics/Haver Analytics
The increase in GDP was due to the improvement in exports, business investment, consumer spending, housing investment, and inventory investment, while the government spending decreased. Imports, a subtraction in the calculation of GDP, increased. Source: Macrobond, XTB
In nominal terms, GDP remains $267 billion below its peak, reached in the fourth quarter of 2019, according to Bloomberg, however the outlook for 2021 seems more optimistic compared to recent months as vaccination rollout began although at a slower than expected pace. Also hopes that the new Biden administration will soon unveil a $1.9 trillion stimulus package also lifted market sentiment. However, some investors remain concerned, whether Congress will pass the bill and how long it will take for Americans to start receiving checks. Many economists warn that a sustained recovery won’t likely take hold until vaccines are distributed and administered nationwide and government-enacted rescue aid spreads through the economy — a process likely to take months.
