As expected the US economy grew in the third quarter at its fastest pace in postwar history as activity bounced back from coronavirus lockdowns.
GDP rose 7.4% from the June quarter or an annual rate of 33.1%.
The driver was more than $US3 trillion worth of Government pandemic relief which fuelled consumer spending, keeping the economy afloat, and cutting jobless numbers.
The June quarter saw a fall of 9% in GDP (31.4% annual) from the first quarter when GDP dipped 1.3% from the three months to December.
But that still leaves the US economy short of where it was at the start of the year.
The news helped Wall Street shake off the blues from Wednesday’s big fall and end the day higher – the Dow was up around 0.7%, the S&P 500 added 1.2% and the Nasdaq rose by just over 1.6% ahead of the release of some vital tech company reports.
The overnight ASX 200 futures market was showing a gain of 45 points at 7 am Friday.
But the reality remains the US economy at the end of the third quarter was 3.5% smaller than at the end of 2019, before the pandemic began.
By comparison, GDP shrank 4% over the entire year and a half of the Great Recession a decade ago.
The first GDP estimate came after news that 732,000 new job benefits claims were lodged – the total number of people on benefits though remains around 22.7 million.
Economists say that just over half of the 22.2 million jobs lost during the pandemic have been regained.
But job growth continues to slow and Exxon Mobil and Comcast, the TV and media giant both announced thousands of jobs will be cut by both companies in the coming weeks. Industrial production fell in September
Most economists expect the slowdown to worsen in the final three months of the year as virus cases rise and federal aid to households and businesses fades.
That’s being helped by the absence of any new stimulus spending plans sufficient to support the economy into 2021. The Senate Republicans have refused to approve any plan from the Democrats and Donald Trump has not wanted to risk rejection by his own party so close to the election.
Now new COVID-19 cases are spiralling across the country, forcing restrictions on businesses like restaurants and bars.
That will see consumer spending slow in the current quarter and early 2021 as the uS hunkers down to survive the latest wave of infections and any turmoil from the election.
Foreshadowing a slowdown in consumer spending, personal income tumbled at a $US540.6 billion annual rate in the third quarter after surging at a $US1.45 trillion pace in the three months to June.
The drop was attributed to a fall in government transfers related to the pandemic relief programs.
