US: Fourth-quarter growth expected to slow sharply

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The first reading of GDP growth during the third quarter showed a record expansion after a record contraction in the second quarter. Despite the strong number, the level of real GDP still remains 3.5% below its peak in the fourth quarter of 2019, they argue Wells Fargo analysts.

Key statements:

“Most spending components posted record rates of growth as the economy reopened. However, growth is projected to decelerate dramatically in the fourth quarter and new cases of COVID pose a downside risk to our projected growth rate of 6.1% in the fourth quarter. ”

“Real GDP jumped at an annualized rate of 33.1% in the third quarter of 2020 relative to the second quarter. Although this is a surprising number, it was not a surprise because previously released monthly data indicated that real GDP would likely grow at a record pace in the third quarter. However, the level of real GDP is still 3.5% below its peak in the fourth quarter of 2019. In other words, the size of the US economy today is 3.5% lower than it was immediately before the COVID pandemic hit the economy. ”

“Real GDP growth in the third quarter was driven by 40.7% in personal consumption expenditures, reflecting the reopening of the economy earlier this year.”

“Although real GDP grew at a record pace in the third quarter of 2020, growth in the fourth quarter is forecast to slow sharply. We currently project that real GDP will grow at an annualized rate of 6.1% in the fourth quarter. That said, we readily recognize that growth in the fourth quarter may not reach that rate if some restrictions need to be reimposed in light of the recent acceleration in COVID cases. ”

Credits: Forex Street

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