GDP back to Q1 2018. Worst ever “net exports.” The decline in government spending was also a drag. “GDP per Capita” bounced back only to 2017 level. By Wolf Richter for WOLF STREET:
The spectacular spectacle of an absurd creature called the “annualized” growth rate of GDP appeared again this morning, and the headlines screamed that GDP, adjusted for inflation, surged by a record of “33.1%” in Q3. On the face of it, this would mean that the economy increased by one-third from Q2. But that’s the magic of “annualized” rates. And it’s time to kill them in headline reporting.
That “33.1%” reflected the jump in Q3 from Q2 but roughly multiplied by 4 to produce a theoretical figure of what GDP for the whole year would be if it kept surging four quarters in a row like this. And that’s not going to happen, just like the plunge in Q2 wasn’t actually “31.4%” and wasn’t repeated four quarters in a row. Deeper down in its GDP report this morning, the Bureau of Economic Analysis also reported “not annualized” figures. And not annualized, GDP jumped by a record of 7.4% from Q2, after the record 9.0% plunge in Q2 from Q1:
Gross Domestic Product (third Estimate), Corporate Profits (revised), And Gdp By Industry, Third Quarter 2020
Both the jump in Q3 and the plunge in Q2 were the sharpest moves ever in the quarterly GDP data, which began in 1947. Before then, there were only annual data.
And we faced another “annualized” figure in today’s GDP reporting: that GDP in Q3 was $18.58 trillion “annual rate” and “seasonally adjusted” and “in 2012 dollars.” These “2012 dollars” are used to adjust for inflation (loss of purchasing power). And so these terms show how far economic activity dropped in Q2 and the partial bounce-back in Q3. This measure of GDP puts it back where it had first been in Q1 2018:
But the US economy isn’t actually that big. This “annualized rate” is roughly 4 times Q3 GDP expressed in 2012 dollars (adjusted for inflation in that manner).
Q3 2020 U.s. Foreclosure Activity At Historic Lows
Actual or “nominal” GDP in Q3 in “current dollars” (not 2012 dollars and therefore not adjusted for inflation) and not annualized, was $5.32 trillion.
Nominal GDP for the entire year of 2020 will be a little over $20 trillion — unless something big and bad happens to economy in Q4 — and will still be down from nominal GDP in 2019 of $21.4 trillion.
And no, consumer spending didn’t soar by “40.7%” in Q3. That was another absurd “annualized” growth rate. Consumer spending jumped 8.9%, not annualized, in Q3 from Q2, after having plunged 9.6% in Q2 from Q1.
Us Q3 Gdp Smashes Estimates As The Dxy And Gold Adopt A Cautious Approach
In dollar terms, and adjusted for inflation, consumer spending bounced back to the level where it had first been in Q2 2018, to $12.92 trillion in the inescapably seasonally adjusted annual rate expressed in 2012 dollars:
Consumer spending accounted for 68% of GDP in Q3. The bounce-back in spending was driven by stimulus and extra unemployment benefits. Not all of this money has been spent in Q2 and Q3, and some of it was used to pay down credit card balances, thus giving these consumers more room to spend in Q4.
Consumer spending includes retail spending, which has soared to record highs under the stimulus money and booming ecommerce sales. But it also includes services such as rents, healthcare, insurance, airline tickets, lodging, etc., which combined are far larger than retail, and some of these services, while also recovering, are still deeply in the hole, particularly the travel-related services.
No, Gdp Didn't Jump “33.1%” In Q3, But 7.4%, After Plunging 9% In Q2: Time To Kill “annualized” Growth Rates. Imports, Powered By Stimulus, Dragged On Gdp
Gross private domestic investment – includes investment in residential and non-residential structures, equipment, and intellectual property products such as software – also bounced back, to Q3 2018 levels of $3.37 trillion seasonally adjusted annual rate:
Imports were a huge drag on GDP. (All figures in 2012 dollars, seasonally adjusted annual rates.) Imports soared by $465 billion in Q3 from Q2, to $3.18 trillion, fired up by stimulus payments and extra unemployment benefits, and by rent and mortgage payments not-made, that consumers spent on imported goods.
So, “real net exports” of goods and services (exports minus imports, the trade deficit) in Q3 hit a negative $1.01 trillion, an all-time worst, 30% worse than in Q2, and 6.4% worse than in Q3 2019.
An Inside Look At The Q4 2023 Gdp Advance Estimate
Negative “net exports” act as a reduction of GDP. In other words, the portion of the stimulus that was spent on consumer goods that were imported, or whose components were imported, stimulated the economies of China, Germany, Mexico, Bangladesh, etc., and acted as negative for the US economy, thank you hallelujah stimulus:
Government consumption and investment declined and dragged on GDP. (All figures in 2012 dollars, seasonally adjusted annual rates). Consumption expenditures and investments by the federal government in Q3 fell by $22 billion from Q2, to $1.34 trillion. State and local government cut their consumption expenditures and investments by $17 billion to $2.0 trillion. In total, all government levels combined, this component of GDP fell by $38 billion to $3.33 trillion:
And for your amusement, GDP per capita, which reflects the slice of the economy per individual, bounced back only to $56, 252 (in 2012 dollars, seasonally adjusted annual rate), not even the Q4 2017 level, and still down 3.4% from a year earlier:
Economic Bulletin Issue 5, 2021
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Core services inflation dished up bad head fakes last time we had this mess in 1966-1982. Mention of a rate hike crops up in a Fed speech.After releasing his plantoreopen America safelyin April, President Trump remarked that prior to the Coronavirus pandemic, the United States had “built the greatest economy anywhere in the world . . . and we’re going to build it again.”
At that time, the consensus among economic forecasters was that pandemic-induced lockdowns would result in a sharp economic contraction in the second quarter, and that the economy would experience tepid growth in the third quarter as it slowly clawed back pandemic losses. But because of the President’s pro-growth policies that set a strong pre-pandemic foundation—and the extraordinary speed and scale of the Administration’s support for America’s families and businesses—our nation’s recovery continues to exceed expectations.
Gdp Preliminary Estimate
This morning’s release of U.S. GDP for the third quarter of 2020 from the Bureau of Economic Analysis (BEA) affirms President Trump’s statement that “we’re coming back, and we’re coming back strong.”
The BEA estimates that real GDP grew 7.4 percent (33.1 percent at an annual rate) in the third quarter, the largest single quarter of economic growth on record and roughly twice the prior record of 3.9 percent (16.7 percent at an annual rate) set in the first quarter of 1950. This growth follows the most severe pandemic-induced contraction on record in the second quarter of 2020, which occurred as the government mandatorily shut down all but nonessential services, and Americans made sacrifices to slow the pandemic.
With the historic third-quarter growth, the United States in a single quarter has now recovered two-thirds of the economic output lost due to the pandemic during the first half of the year.(Figure 1). In the recovery from the 2008-09 recession, it took 4 times as long to regain the same share of lost economic output.
Chart: Robust Spending, Investment Fuel 5.2% Gdp Growth In Q3 '23
After data confirmed the recovery was well underway beginning in May, the nonpartisan Congressional Budget Office (CBO) in July projected a second quarter contraction roughly in line with the actual decline that occurred, though the CBO projected a third quarter growth rate of just 4.0 percent (17.0 percent at an annual rate). The strong footing of the United States economy prior to the pandemic contributed to the stronger-than-expected recovery our country is currently experiencing.
The United States had the highest GDP growth rate among the G7 countries from 2017 to 2019, with growth more than double the G7 average. While the pandemic hit every major economy around the world, the United States experienced the least severe economic contraction of any major Western economy in the first half of 2020, with the Euro Area economy’s contraction being 1.5 times as severe as the contraction of the U.S. economy.
A resurgence in consumer spending, which accounts for two-thirds of GDP, supported the historic third quarter GDP growth and reflects both the reopening of America’s businesses and the confidence of consumers to spend on goods and services once more. Consumer spending in the services sector alone accounted for nearly half of GDP growth in the third quarter. Greater third quarter spending on recreation, food, and accommodation services—sectors acutely impacted by lockdowns—alone accounted for one-fifth of total GDP growth in the third quarter.
New Data Show That Economic Growth Was Broadly Shared In 2021
The growth in the third quarter, and the particular strength of American consumers, also reflects the swiftness and magnitude of the aid the Administration provided directly to America’s families, workers, and small businesses. The $2.7 trillion in stimulus that the CARES Act and other pandemic-related legislation supplied is roughly 13 percent as a share of GDP. That is more than twice the size of the 2009 American Recovery and Reinvestment Act (ARRA) as a share of GDP.
This direct aid supported Americans’ income through the pandemic. Total personal income rose above, and still remains above, pre-pandemic levels. Personal
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