Tag Archives: GDP

GDP Sets Record for Growth During Q3

Economy, , ,

The annualized rate for the growth of the Gross Domestic Product (GDP) reached a record of 33.1% during July, August, and September. The historic growth came immediately after one of the worst slumps in history, the second quarter’s annualized shrinkage of 33.4%.

The see-saw like behavior of the US economy can be accounted for by the ravages of the coronavirus pandemic, which forced a lockdown during the second quarter which shuttered many businesses, causing widespread job loss and business closures. In June stay-at-home orders lifted and the economy began to re-open, accounting for the rapid rebound of the economy in Q3.

Yet, even such a strong rebound has not resulted in a full recovery, which some analysts believe could take years, especially since the rate of GDP growth is expected to significantly slow down during Q4 of 2020.

Much of the growth is attributed to money set loose into the economy via the CARES Act, which distributed $2.2 trillion to every eligible American.

“Not only was the US economy enjoying the immediate bounce as a result of economic re-openings, but it was basking in significant fiscal stimulus support schemes,” said Seema Shah, the chief strategist at Principal Global Investors. “Now, the path forward will inevitably be an uphill struggle.”

Economic Growth Passes Previous Record for Duration

Economy

The economy broke a record at the end of June when it surpassed the previous longest period of growth of 120 months, or ten uninterrupted years.


The previous record was set when the US economy didn’t stop growing from March 1991 until March 2001 during which time the average annual real GDP grew by 3.6%. The record-breaking growth we are in now began in June 2009, and is still expanding, although the average annual real GDP has only been 2.3%.


The previous expansion that ended in March 2001 came to its unhappy end when the dot-com bubble burst.


Compared to other expansions, which were far shorter, growth was faster. For instance, during the 45-month expansion from October 1949 until July 1953, the economy grew by 6.9%. Between April 1958 and April 1960, the economy expanded by 5.5%.


Studies have shown that the expansion has not benefited all Americans equally. Steven Pressman of Colorado State University, a professor of economics who is concerned with income inequality, says that 60% of economic gains have benefited the top one percent of the population.


One example Pressman cites are the salaries of schoolteachers. Adjust for inflation, their incomes declined in 2018, by about 0.3%. During the same time period the median pay for top CEOs in the US, including non-salary compensation, climbed by 65%, adjusted for inflation between 2009 and 2018.

Sales Drop While Business Inventories Rise for Second Consecutive Month

Economy, ,

Inventories up, sales down in October and November
Inventories up, sales down in October and November

The Commerce Department announced on Wednesday the US business inventories rose during the month of November while sales fell for the second month in a row.

Business inventories grew by 0.2 percent, a figure that is consistent with the expectations of economists.  The number also followed a similar gain in October.

Inventories are an important part of the total gross domestic product. Excluding cars, retail inventories went up by 0.1 percent after posting a gain of 0.3 percent in October.

In November sales shrunk by 0.2 percent and 0.3 percent in October. It would take approximately 1.31 months for businesses to clear their shelves is sales continued at November’s tempo.