After a year in which the pandemic and politics posed challenges unlike the United States in generations, the economy closed in good shape.
Gross domestic product, or the sum of all goods and services, rose at a rate of 4.0% in the fourth quarter, slightly below the expectation of 4.3% of economists surveyed by Dow Jones. This was the Commerce Department’s first growth estimate for the quarter.
The annualized pace closed 2020 which saw GDP decline globally by 3.5% year-on-year and 2.5% from the fourth quarter of 2019. The economy fell into recession in February, a month before the World Health Organization declared Covid-19 a pandemic. The 3.5% decline is the worst year in the United States since at least the end of World War II.
The economy hit a post-depressive record of 31.4% in the second quarter and then recovered 33.4% in the next three months.
Increases in exports, non-residential fixed investment, consumer spending, residential investment and inventories contributed positively to GDP during the fourth quarter, while overall declines in public spending at the federal, state and local levels went up. affect growth.
Personal consumption expenditures accounted for 68% of all U.S. activity and increased at a rate of 2.5% in the fourth quarter. Gross private domestic investment increased by 25.3%, while government investment and investment decreased by 1.2%, mainly due to a fall in non-defensive spending of 8.4%.
Exports, which add to GDP, grew by 22%, while imports, which remain of the total, jumped by 29.5%.
It starts slowly in 2021 and then acceleration
Activity appeared to slow for the $ 21.5 trillion economy as the year ended, as economists see challenges in early 2021.
A slower-than-expected roll-out of Covid-19 vaccines, along with a continued increase in cases and restrictions on activity across the country, is likely to see little growth in the fourth quarter. However, activity is expected to recover sharply later in the year, once vaccines are more widely distributed and the economy can return to normal.
“Now there is nothing more important to the economy than vaccinating people,” 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, though he noted “considerable risks” to forecasting depending on the path of the virus.
The biggest challenge is getting people back to work.
Although the economy recovered 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 hospitality industry, recalled that many works need 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 performed better. House prices are rising almost historically, savings levels remain high and household balances remain strong.
In addition, Congress approved another infusion of incentives in December and President Joe Biden wants to spend another $ 1.9 trillion that could follow another package later in the year. The Fed maintains a low interest rate environment and buys at least $ 120 billion a month in bonds to keep activity running smoothly.
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