US economy rebounds by record 33.1% in Q3 after Covid-19 plunge
WASHINGTON (BLOOMBERG) – The US economy bounced back with a record yet temporary surge of growth in the third quarter as businesses reopened and stimulus cash powered consumer spending, reversing much of the collapse stemming from coronavirus-enforced lockdowns.
US gross domestic product (GDP) for the July to September expanded at a 33.1 per cent annualized pace, after a 31.4 per cent plunge in the second quarter, the Commerce Department’s initial estimate showed on Thursday (Oct 29). This beat economists’ estimates for a 32 per cent increase.
Personal spending fueled the surge in growth, climbing an annualized 40.7 per cent, also a record, while business investment and housing also posted strong increases.
While the report makes clear that the economy has found a solid footing for now, analysts caution that growth will be much more modest and choppy in months to come, especially as the spread of the virus gathers pace again and lawmakers remain in an extended deadlock over a new stimulus package.
Moreover, there are still nearly 11 million fewer workers on payrolls than there were before the pandemic hit, and analysts say a full recovery in GDP is at least several quarters away.
Even with the outsize gain, GDP is 3.5 per cent below its pre-pandemic peak, and the virus will keep business and jobs depressed in sectors like travel and restaurants.
With just five days until Election Day, President Donald Trump will likely point to the latest figures as evidence of his ability to guide the American economy through the Covid-19 crisis. It’s unclear, though, how much of an impact the upbeat figures may have on the election, especially given more than 76 million Americans have already cast their vote.
Futures on the S&P 500 rose slightly after economic data on Thursday morning. A separate report showed applications for US state unemployment benefits fell more than forecast last week.
Initial jobless claims totaled 751,000 in the week ended Oct 24, down 40,000 from the prior week, Labor Department data showed. Economists called for 770,000 initial claims and 7.78 million continuing claims, according to the median estimates in Bloomberg surveys.
The figures, the last snapshot of the US labour market ahead of Tuesday’s election, underscore a further, yet gradual, recovery in the job market. Nonetheless, a renewed surge in coronavirus infections across the country and a deadlock over new fiscal stimulus threaten to limit further progress.
US stocks had plunged on Wednesday amid concerns over the latest increase in virus cases and its potential impact on the global economy. The Dow Jones Industrial Average dropped 943.24 points, or 3.4 per cent, posting its fourth straight negative session.
Asian stock markets fell on Thursday (Oct 29) but not as sharply as Wall Street’s overnight rout on the sense that the region had Covid-19 more under control,
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.6 per cent, while Japan’s Nikkei fell just 0.3 per cent and China’s blue chips rose 0.5 per cent. Singapore’s Straits Times Index dropped 1.3 per cent.
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