By Tom Burnett CFA
On October 29, 2020, the Department of Commerce’s Bureau of Economic Analysis issued its initial report on third quarter GDP growth for the U.S. economy. The third quarter performance came in above expectations at the annual rate of 33.1% above the end of the second quarter. The strong bounce back came after declines of 5.0% in the first quarter and 31.4% in the second quarter. Even after this strong performance, the nation’s GDP remains 2.9% below the level of the third quarter in 2019.
Both Consumption and Investment showed strong recoveries in the third quarter with Investment rising at an annual rate of 11.6% after falling at an 8.7% annual rate in the second quarter.
In terms of inflation, the Implicit Price Deflator rose by 3.7% in the third quarter, after falling 2.1% in the June quarter. By this measure, prices have risen by more than 3.0% through September. Investors need to watch price data carefully since a prolonged period of price increases would likely push interest rates higher, off their current record low levels.
Today’s announcement is the first cut at Q3 GDP, the second estimate will be released on November 25, 2020.
Tom Burnett CFA is Director of Research