US GDP contracts by 3.5 pct. in 2020
By Jorge A. Bañales
Washington, Jan 28 (efe-epa).- The United States’ economy shrank by 3.5 percent in 2020 due to major coronavirus-triggered disruptions, its biggest contraction since 1946, the Commerce Department’s Bureau of Economic Analysis said Thursday.
Fourth-quarter gross domestic product grew at a 4 percent annual rate, the BEA said in its first of three readings for that October to December period. That result followed wild volatility in the second and third quarters, when GDP plunged by 31.4 percent on an annual basis before skyrocketing by 33.4 percent.
GDP for October to December 2020 was up 1.45 percent relative to the third quarter.
Fourth-quarter increases in exports, nonresidential fixed investment, personal consumption expenditures, residential fixed investment and private inventory investment were partially offset by decreases in federal, state and local government spending.
The resurgence in the number of confirmed coronavirus cases and Covid-19 hospitalizations and deaths led state governments to re-impose restrictions on some business activities, leading to a new round of layoffs in December and the first drop in job creation since April.
Even so, personal consumption expenditures, which in the US are equivalent to nearly two-thirds of GDP, rose 2.5 percent in the last quarter of 2020 after soaring by 41 percent in the third quarter, when spending was fueled by more than $3 trillion in emergency government stimulus.
The International Monetary Fund has projected that US economic activity will grow 5.1 percent this year, while many economists expect December’s job losses will be followed by a slow increase in hiring.
For its part, the Federal Reserve on Wednesday kept its benchmark interest rate at a target range of between 0 percent and 0.25 percent amid expectations that the vaccine rollout will have a positive impact on the country’s business activity and labor market.
Fed Chairman Jerome Powell said in a press conference after the Federal Open Market Committee’s latest two-day meeting that “there’s nothing more important to the economy now than people getting vaccinated.”
The FOMC statement, meanwhile, said the “path of the economy will depend significantly on the course of the virus, including progress on vaccinations.”
“The ongoing public health crisis continues to weigh on economic activity, employment and inflation, and poses considerable risks to the economic outlook,” it added.
“The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” the statement said.
The onset of the pandemic in the US last March and the economic lockdowns implemented by most states to contain the virus caused the official unemployment rate to soar to 14.7 percent in April, the highest level in more than 50 years.
The jobless rate in February 2020 stood at 3.5 percent.
A Gallup poll conducted between Jan. 4 and Jan. 15 and released Thursday showed that the US economic confidence index fell five points to -21, the lowest level since June and the second consecutive drop after seven months of steady improvement. EFE-EPA