US economy grew 33.1% in Q3

US economy grew 33.1% in Q3

Thursday, November 26, 2020

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WASHINGTON, DC, United States (AP) — The second of three estimates on United States growth for the July to September quarter was unchanged at a record pace of 33.1 per cent. But a resurgence in the novel coronavirus is expected to slow growth sharply in the current quarter with some economists even raising the spectre of a double-dip recession.

While the overall increase in the country's total output of goods and services was static, the Commerce Department reported yesterday that some components were revised.

Bigger gains in business investment, housing and exports were offset by downward revisions to state and local government spending, business inventories and consumer spending.

The 33.1 per cent gain was the largest quarterly gain on records going back to 1947 and surpassed the old mark of a 16.7 per cent surge in 1950.

Still, the economy has not fully recovered from output lost in the first six months of the year when gross domestic product (GDP) suffered a record-shattering drop of 31.4 per cent in the second quarter. That followed a slide at an annual rate of five per cent in the first quarter, when the pandemic shut down much of the economy and triggered millions of layoffs.

Economists are concerned that growth has slowed sharply in the current October to December period, and there are fears that GDP could dip back into negative territory in the first three months of next year.

Mark Zandi, chief economist at Moody's Analytics, said he had forecast GDP growth of around two per cent in the fourth quarter, with the real possibility of GDP turning negative in the first quarter of next year.

Economists at JPMorgan Chase have trimmed their forecast for the first quarter to a negative one per cent GDP rate.

“This winter will be grim and we believe the economy will contract again in the first quarter,” the JPMorgan economists wrote in a research note.

“The economy is going to be very uncomfortable between now and when we get the next fiscal rescue package,” Zandi said. “If lawmakers can't get it together, it will be very difficult for the economy to avoid going back into a recession.”

While lawmakers have returned for a lame-duck session, there has been no progress so far in narrowing the differences between Democrats, who are pushing for a big package of US$1 trillion or more, and Senate Republicans who are refusing to approve anything above approximately US$500 billion.

More than nine million people will lose their unemployment benefits at the end of the year when two jobless benefit programmes are set to expire, unless Congress extends them.

At the same time, virus cases are surging, triggering a number of states to reimpose business limits such as earlier closing times for bars and restaurants and stricter limits on the number of in-store shoppers.


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