The Bureau of Economic Analysis has announced that the United States economy grew at its fastest pace on record in the third quarter, rebounding at an annual rate of 33.1 percent.
The impressive reading follows on from a record 31.4 percent contraction in the second quarter- and a negative 5 percent hit in the first quarter – when the economy officially entered recession in February.
Although the report signals that the economy is crawling out of the recession it was plunged into by COVID-19, it still has a way to go to attain its pre-pandemic strength.
The report released on October 29th on the gross domestic product (GDP) is the last major economic data release before the November 3 US presidential election.
It indicates that stimulus from the federal government including enhanced employment benefits, lifelines for small businesses, and one-off cash payments to households helped the economy bounce back in the third quarter.
Despite the record growth, there is mounting data that points to a downshifting recovery in the fourth quarter. The surging COVID-19 infections especially are raising the prospect of more restrictions that could affect businesses.
As a result, Federal Reserve Chairman, Jerome Powell has warned that more government spending is needed to keep the recovery on track.
He cautioned that, “Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses.”
Earlier this year, a COVID-19 recession was triggered by lockdowns designed to contain the spread of the disease. Entire sectors of the economy ground to a halt and 22 million people were thrown out of work in March and April.
This Federal government acted with bold and decisive action including slashing interest rates to near zero, resuming bond buying to keep borrowing costs very low and making trillions of dollars of lending available to support credit markets.
The US Congress also moved quickly on the spending front by approving some $3 trillion in virus relief aid to help small businesses keep workers on payrolls and keep laid-off workers afloat. This was also instrumental in assisting state and local governments cope with the public health crisis.
The combined efforts of the Fed and Congress according to the report, helped “power the economy in the third quarter.”
However, key federal stimulus programmes including the lifeline to small businesses and the $600 federal weekly top-up to state unemployment benefits expired at the end of July and congress is yet to approve a second round $1,200 stimulus checks to millions of Americans.
Democrats have pushed for a $2.2 trillion coronavirus stimulus bill, while the White House has instead indicated it would be willing to spend $1.6 trillion.
United States Speaker of the House, Nancy Pelosi slammed the Trump administration for “failing miserably” to pass another round of coronavirus relief aid before Election Day, killing hopes for a stimulus package.
For his part, President Trump also criticised Pelosi and promised a stimulus bill after November 3rd.
“After the election, we’ll get the best stimulus package you’ve ever seen, because I think we’re going to take back the House because of her,” Trump said. “I think you have a lot of congressmen and women – Republican – that are going to get elected. We’ll take back the House. We’ll hold the Senate. We’ll hold the White House.”
