The V-Shaped Recovery Continues
The economic recovery from the coronavirus pandemic continues uninterrupted.
Yesterday we got news that the economy roared back in the third quarter of the year, with GDP up 33.1% on an annualized basis. The previous record was a 16.7% increase in 1950. That came after lockdowns and the coronavirus fueled a 31.4% contraction in Q2 on an annualized basis (the worst in U.S. history)
Because these statistics are annualized, it means that the economy would’ve grown 33.1% for the entire year if every quarter grew at the same pace as this one. Adjusting the figures to a quarterly basis, data the economy contracted 9% between the first and second quarter of the year, and grew 7.4% from the second to third.
While the second quarter contraction was catastrophic, the U.S. at least contracted by less than most of our peers in Europe.
Here are the cumulative GDP growth rates in 2020
Spain: -9.1% https://t.co/cyJMrKI2gV
— Jeremy Horpedahl 🍞 (@jmhorp) October 30, 2020
Yesterday’s report brought some much needed good economic news, and a whole host of other economic indicators were published today.
According to Reuters:
Consumer spending, which accounts for more than two thirds of U.S. economic activity, increased 1.4% last month after gaining 1% in August. Economists polled by Reuters had forecast consumer spending rising 1% in September.
Consumers boosted purchases of goods like new motor vehicles, clothing and footwear. They also lifted spending on healthcare, membership clubs, as well as outlays at sports centers, parks, theaters and museums. Still, consumer spending remains below its level at the start of the year, held back by outlays on services like air travel and hotel accommodation.
Americans are also dipping into savings to fund spending. The saving rate slipped to a still high 14.3% from 14.8% in August. It peaked at record 33.6% in April.
Despite the stronger-than-expected jump in consumer spending last month, inflation remained benign.
The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2% after climbing 0.3% in August. In the 12 months through September, the so-called core PCE price index increased 1.5% after advancing 1.4% in August.
The data indicates that the service sector is set to recover slower than in prior recessions, but previous recessions haven’t had rules in place limiting indoor dining to 25% (where its allowed at all).
Due to the pandemic 22 million jobs were lost by the time the economy bottomed out. The number of employed hit a record 152.5 million in February before the plague plunged that to 130.3 million. The economy has since recovered roughly half of those jobs, with 141.7 million currently employed as of the most recent data (which is current through September). The October figures will be available on November 6th.