After a year in which a pandemic and politics raised challenges, unlike the USA in generations, the economy closed in a pretty good shape.
Gross domestic product, or the sum of all goods and services produced, rose by 4.0% in the fourth quarter, slightly below the expectations of 4.3% from economists surveyed by the Dow Jones. This was the initial estimate of growth for the Commerce Department quarter.
The annualized pace closed a 2020 that saw an overall decline in GDP of 3.5% for the full year and 2.5% from the fourth quarter of 2019. The economy fell into recession in February, a month before World Health Organization to declare Covid-19 pandemic. The 3.5% drop is the worst year for the US since at least the end of World War II.
The economy hit a post-depression record of 31.4% in the second quarter, then returned to a 33.4% gain over the next three months.
Export growth, non-residential fixed investment, consumer spending, residential investment and stocks contributed positively to GDP for the fourth quarter, while overall declines in government spending at the federal, state and local levels influenced growth.
Personal consumption expenditures accounted for 68% of all US activity and grew at a rate of 2.5% in the fourth quarter. Gross private domestic investment increased by 25.3%, while government spending and investment decreased by 1.2%, largely due to a decrease in non-defensive spending of 8.4%.
Exports, which add to GDP, increased by 22%, while imports, which fall from the total, increased by 29.5%.
Slow start observed for 2021, then acceleration
Activity seemed to slow to $ 21.5 trillion in the US economy as the year drew to a close, as economists see challenges for the first half of 2021.
A slower-than-expected release of Covid-19 vaccines, coupled with a continuing increase in cases and restrictions on activity across the country, is likely to mean a small increase in the fourth quarter. However, it is expected that activity will return strongly later in the year, once vaccines are distributed more widely and the economy can return to a normal appearance.
“There is nothing more important to the economy now than people getting vaccinated,” Federal Reserve Chairman Jerome Powell said Wednesday.
“There is good evidence to support a stronger economy in the second half of this year,” he added, although he noted “considerable risks” to the forecast, depending on the path of the virus.
The biggest challenge is getting people back to work.
Although the economy regained 12.5 million jobs from May to November, the loss of 140,000 in December, largely due to a decline of nearly half a million in the hotel industry, reminded us that much work needs to be done. . The sector had an unemployment rate of 16.7% in December, compared to 5.7% in February.
However, other areas of the economy have fared better. House prices are rising at near-historic levels, savings levels are still high and household balance sheets remain strong.
In addition, Congress approved another stimulus infusion in December, and President Joe Biden is looking to spend another $ 1.9 trillion, which could be followed by another package later in the year. The Fed maintains a low average interest rate and buys at least $ 120 billion a month in bonds to maintain current activity.
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