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US economy grows by record 33.1 per cent in Q3 after Covid plunge

US gross domestic product (GDP) grew at an annualized rate of 33.1 per cent in the third quarter, marking the fastest three months of economic growth on record. The data comes after an unprecedented contraction caused by the coronavirus pandemic.

Washington, 29 October 2020 (dpa/MIA) – US gross domestic product (GDP) grew at an annualized rate of 33.1 per cent in the third quarter, marking the fastest three months of economic growth on record. The data comes after an unprecedented contraction caused by the coronavirus pandemic.

The annualized rate extrapolates growth for a period and projects full-year growth based on that number. Thus, 33.1-per-cent annualized growth is equivalent to about 7.4-per-cent quarter-on-quarter growth, according to a first estimate released by the Bureau of Economic Analysis on Thursday.

In the July-to-September period, the economy recovered significant ground it lost earlier in the coronavirus pandemic as businesses reopened and customers returned to shops, in line with expectations.

Increased consumption, exports, and business and residential investment fuelled the GDP rise, which was partly offset by decreases in government spending, according to the report.

The third quarter rebound comes off the back of a miserable second quarter when GDP shrank at a record 31.4-per-cent annualized rate, or 9 per cent from the first quarter, due to business shutdowns and stay-at-home orders.

“The enormous contraction of GDP in the second quarter means any growth in the third quarter is coming off of a significantly smaller base of GDP,” said Josh Bivens, director of research at the Economic Policy Institute.

The economy is still far below its pre-pandemic level – 3.5 per cent smaller than it was in the final quarter of last year.

Thursday’s report was closely watched as it is the last major piece of economic data before Tuesday’s presidential election.

US President Donald Trump, who is trailing Democratic rival Joe Biden in the polls, touted the GDP data as the “Biggest and Best in the History of our Country, and not even close.”

“Next year will be FANTASTIC!!! … So glad this great GDP number came out before November 3rd,” he wrote on Twitter.

It is unclear whether the upbeat figures will sway voters, particularly as more than 78 million people have already cast their ballot.

Trump was expected to point to the data as evidence of his ability to guide the US economy through the coronavirus crisis.

But Biden accused the Republican incumbent of plunging the economy into a deep recession due to his failure to control the outbreak.

“We are in a deep hole and President Trump’s failure to act has meant that Q3 growth wasn’t nearly enough to get us out of,” Biden said in a statement.

“The recovery is slowing if not stalling; and the recovery that is happening is helping those at the top, but leaving tens of millions of working families and small businesses behind.”

Experts also say progress is slowing, as coronavirus cases spike again across the United States and some areas reinstate lockdown measures.

New daily coronavirus cases have recently climbed back up to more than 70,000. The virus has infected 8.8 million people and resulted in more than 227,700 deaths in the US, far more than in any other country.

A new round of government relief is nowhere in sight. Key benefits of the nearly 3 trillion dollars in stimulus passed by Congress earlier this year have largely expired and lawmakers remain in a months-long deadlock.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, economist at research consultancy Capital Economics.

“We expect fourth-quarter GDP growth to be only 4.5 per cent.”

The unemployment rate is at 7.9 per cent and is expected to stay high in the coming months.

Some 751,000 people filed initial weekly jobless claims in the US in the week ending October 24, the Labor Department said on Thursday. It marked a decrease of 40,000 from the previous week.

Before the pandemic, new weekly unemployment claims usually hovered at around 200,000.

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