Rising from the worst quarterly decline on record, the U.S. economy grew at an equally record rate as the country begun to recover from the pandemic's initial hit. Third quarter gross domestic product (G.D.P.), a measure of a nation's total goods and services produced, for the U.S. expanded at a 33.1% annualized pace, according to the Commerce Department's initial estimates for the period between July to September.
That is the largest quarter-to-quarter gain since the government began tracking G.D.P. data following World War II.
That gain followed a 31.4% plunged during the second quarter amid the initial stay-at-home measures and unemployment spike due to the coronavirus outbreak in the U.S. The speed recovery during the quarter reflected the government's more than $3 trillion stimulus relief injection which helped fuel consumer spending, as well as reopen businesses and restart activities that was restricted by the pandemic.
Yet, the economy remains 3.5% below pre-pandemic levels and the lingering impacts of the pandemic will likely continue as it still struggles to recovery from recession lows.
Inside the Numbers
On a year-to-year basis, third quarter G.D.P. for the U.S. increased 7.4% after sinking 9% in the April through June economic period. The rebound so far has reversed about two-thirds of the 10.1% decrease in G.D.P. recorded for the first half of 2020; there's still a long way for the U.S. economy to go to reach full pandemic recovery.
For another angle, current-dollar G.D.P. increased 38%, or $1.64 trillion, in the third quarter to a level of $21.16 trillion. In the second quarter, G.D.P. decreased 32.8%, or by $2.04 trillion.
Personal income decreased $540.6 billion in the third quarter, which was in contrast to an increase of $1.45 trillion in the second quarter. That decline was most attributed to a decline in relief funds created by the Trump administration's CARES Act. Disposable personal income also decreased in the third quarter, falling by 13.2% or $636.7 billion.
Personal savings remains high, but the pace and amount of savings has decreased quarter-to-quarter; in the second quarter, Americans saved $4.71 trillion, while in the third quarter they saved $2.78 trillion. The saving rate for the third quarter fell to 15.8% from the second quarter's 25.7%.
While consumer spending surged during the third-quarter, it may have met its peak if the coronavirus outbreak in the U.S. persists to the point where business closures and stay-at-home orders are reintroduced. Nonetheless, the pandemic's slow economic growth and falling consumer confidence may begin to lesson consumer spending in the coming months.
More Stimulus Needed
Most economists agree that more coronavirus stimulus will be needed to weather the continued economic hardships the prolonged outbreak has brought to many industries, especially travel and restaurants. Currently, aid talks between Congress and the Trump administration have ended ahead of the U.S. presidential election on Nov. 3.
It is unclear when a new stimulus package will occur, but House Speaker Nancy Pelosi has signaled that she intends to pass a package following the election. Yet, the outcome of the election may determine when and how much a new stimulus bill will be.
If President Donald Trump wins the election, a new package is likely before the end of the year, though the amount may be less than the House was working towards. But, if presidential challenger former Vice President Joe Biden wins, the stimulus package may wait until after Biden takes office because Trump would not have incentives to pass a new bill during his final months in office.
