Under President Trump’s leadership, the American economy is roaring back. Exceeding all expectations, real GDP grew 7.4 percent (33.1% at an annual rate) in the third quarter, the largest single quarter of economic growth on record.
In a single quarter, the United States experienced the largest consumer spending increase and has now recovered two-thirds of the economic output lost due to the pandemic during the first half of the year.
Third Quarter Real GDP Growth
The Bureau of Economic Analysis (BEA) estimates that real GDP grew 7.4 percent (33.1 percent at an annual rate) in the third quarter of 2020, above market expectations.
This is 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 follows the sharpest single quarter economic contraction on record in the second quarter of 2020 due to pandemic-induced lockdowns.
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.
In the recovery from the 2008-09 recession, it took 4 times as long to regain the same share of lost economic output.
Largest Consumer Spending Increase
Real consumer spending rose 8.9 percent (40.7 percent at an annual rate) in the third quarter, the largest quarterly increase on record. Both goods and services experienced steep increases.
Consumer spending accounted for roughly three quarters of overall real GDP growth in the third quarter, partly reflecting both the reopening of America’s businesses and the confidence of consumers to spend on goods and services once more.
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.
The direct aid provided to workers, families, and small businesses through the CARES Act supported Americans’ income through the pandemic. Total personal income rose above, and still remains above, pre-pandemic levels.
Personal income excluding the government transfers provided for in the CARES Act, however, decreased from pre-pandemic levels.
Without this income support, the resurgence in consumer spending would likely not have been as strong. Having added back 11.4 million jobs since April with over 5 in 10 jobs lost in the pandemic recovered, total wages and salaries increased 5 percent in the third quarter and is now just 1.4 percent below its pre-pandemic level.
The CARES Act – in addition to the other pandemic-related pieces of legislation signed into law by President Trump – totaled $2.7 trillion, roughly 13 percent of GDP, in economic stimulus. That is more than double the size of the 2009 American Recovery and Reinvestment Act (ARRA), as a share of GDP.
Surge in Investment
Residential investment skyrocketed 12.3 percent (59.3 percent at an annual rate), with most of the increase due to real estate commissions reflecting a rebound in home sales.
The increase in residential investment was the largest since 1983.
Business investment rose 4.7 percent (20.3 percent at an annual rate), with a steep increase in equipment more than offsetting declines in structures and intellectual property products.
Inventory investment added 6.6 percentage points to GDP growth, with most of the increase in motor vehicles.
Strength of the Pre-COVID Economy
Prior to the pandemic, the United States under President Trump had the highest GDP growth rate among the G7 countries – with growth more than double the G7 average from when the President took office through the end of 2019.
In President Trump’s first 3 years in office, the economy grew by $310 billion (1.2%) more than what was expected prior to the 2016 election.
Please feel free to pass this information along to your communities and networks.
V/r,
Amanda
Amanda Robbins
Associate Director
The White House Office of Public Liaison