US economy grew 4% in fourth quarter but ended 2020 in coronavirus-induced hole
Refinitiv economists expected the report to show the economy had expanded by 4%
The U.S. economic recovery from the coronavirus shutdown slowed markedly in the final three months of the year, as the nation failed to recoup all of its losses from the COVID-induced recession.
Gross domestic product, the broadest measure of goods and services produced across the economy, grew by 4% on an annualized basis in the three-month period from October through December, the Commerce Department said in its first reading of the data Thursday.
Refinitiv economists expected the report to show the economy had expanded by 4%.
The economy grew at an annual revised rate of 33.4% in the previous quarter, a record-shattering pace as businesses reopened from the unprecedented lockdown.
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But the headline figure often obscures the whole picture because the Commerce Department calculates the GDP on a quarter-over-quarter basis as if that level of growth were sustained for a full year; in times of huge swings up or down, it can exaggerate both the decline in growth and the subsequent rebound.
Looking at the quarterly data, the nation's GDP grew 1% from the third to the fourth quarter, compared with an increase of 7.48% between the second and third quarters, marking a substantial slowdown as a resurgent virus forced a fresh wave of business closures and lockdown measures.
The growth in the latter half of the year was not enough to offset the sharp downturn from the first few months, when the U.S. economy came to a near standstill to slow the spread of the virus, which has infected more than 25 million Americans and killed over 429,000, the most in the world.
The economy remains 2.46% smaller than at the end of 2019. Measuring 2020 output overall against the previous year, GDP fell 3.5% in 2020, the worst on record.
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"The report reflects an economy still dictated by the pandemic playbook," said Michael Reynolds, investment strategy officer at Glenmeade. "One of the larger contributors to fourth-quarter GDP was healthcare spending, while restaurants and food service were a notable detractor due to renewed COVID-19 restrictions across the country, as well as the fact that outdoor dining became untenable due to colder weather in some portions of the country."
The economy's coronavirus-induced swoon, illustrated in the second quarter's decline in GDP, undercut once-vibrant growth. As the economy reopened in the second half of the year, growth rebounded, fueled in part by trillions of dollars in government aid from Congress and a resurgence in consumer spending, which accounts for roughly two-thirds of the nation's GDP.
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Although the recovery has plateaued this winter, economists expect it will heat up again later in 2021, once the vaccine is widely disseminated and the virus is under control. President Biden is also pushing Congress to pass a $1.9 trillion relief package -- on top of the $900 billion in spending that lawmakers approved in December -- that includes a third round of $1,400 stimulus checks, supplemental unemployment aid through September, $350 billion in funding for state and local governments and $20 billion for vaccine distribution.
“There’s nothing more important to the economy right now than people getting vaccinated,” Federal Reserve Chairman Jerome Powell told reporters during a Wednesday news conference. "That is really the main thing about the economy, is getting the pandemic under control, getting everyone vaccinated, getting people wearing masks and all that. That’s the single most important economic growth policy that we can have.”