By Tom Burnett CFA
On January 28, 2021, the Bureau of Economic Analysis announced the GDP figures for the final quarter of 2020. The real GDP output rose by an annual rate of 4.0% compared to the level achieved in the third quarter. The impact of the COVID-19 outbreak is clearly shown by the pattern of the four quarters of 2020. In 2020, the first quarter saw a decline at an annual rate of 5.0%. The June quarter was the low point with a decline of 31.4%, on an annual basis. The third quarter recovered sharply with an annual rate of GDP growth of 33.4%. The recovery continued in Q4 with a GDP growth rate of 4.0%, again on an annual basis.
For the 2020 year, GDP fell by 3.5% from the level attained in 2019. That decrease came after positive growth of 2.2% in 2019 and growth of 3.0% in 2018. The 2020 annual decline was the worst GDP performance since the Recession of 2008-09. Today’s announcement is the first ‘Advanced’ look at the GDP performance with more accurate updates to be issued in February.
Inflation, as measured by the changes in Personal Consumption Expenditures remains quiet. For 2020, the annual rate was 1.2%, with a fourth quarter annual rate of 1.5%. These readings remain well below the Federal Reserve’s inflation targets.
Tom Burnett CFA is Director of Research