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November 25, 2020US GDP 2020 Q3 (SECOND ESTIMATE)
The Bureau of Economic Analysis (BEA) has released the Q3 2020 US Real Gross Domestic Product (GDP) "second" estimate today. The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. The US economy grew 33.1% in Q3 after the decline of 31.4% (seasonally adjusted annualized rate, chained 2012 dollars) in Q2 2020, unrevised from the advance estimate. The increase in Q3 reflect business reopening and resumed activities after more severe COVID-19 restrictions in Q2. BEA also noted that the full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate because the impacts are generally embedded in source data and cannot be separately identified. The US economy in Q3 2020 was 2.9% smaller than in Q3 2019.
Increases in GDP in Q3 came from positive contributions from personal consumption, private inventory investments, exports, non-residential and residential investments. Government spending was down at the federal and state and local levels. Compared to the advanced estimates, upward revisions to non-residential fixed investment, residential fixed investment, and exports were offset by downward revisions to state and local government spending, private inventory investment, and personal consumption. Imports were also revised up.
Personal consumption expenditures increased 40.7% in Q3 (in real terms at an annualized rate) following decreases of 33.2% in Q2 and 6.9% in Q1. Services growth was led by increases in health care and food services and goods were up from sales of motor vehicles and parts and clothing and footwear. Personal consumption expenditure was 2.9% smaller in Q3 2020 compared to Q3 2019.
Residential investment activity was up 12.3% over Q2, mainly reflecting increases in brokers' commission and ownership transfer costs, and was 6.6% above Q3 2019 levels. Growth in non-residential fixed investment was led by the increase in transportation equipment.
Export growth was 59.7% in Q3 (real terms at annualized rates) following declines of 64.4% in Q2 and 9.5% in Q1. The increase in exports primarily reflected higher goods shipments, led by vehicles, engines and parts and capital goods. Compared to Q3 2019, goods exports were 9.3% lower and service exports were 24.0% lower in Q3 2020.
US nominal GDP increased 38.0% in Q3 following the declines of 32.8% in Q2 and 3.4% in Q1. The personal consumption expenditure price index increased 3.7% compared to the 1.6% decrease the previous quarter.
A seasonally adjusted annualized rate shows what the percent change would be if the quarterly rate continued for four quarters. It is computed by compounding the quarterly rate for four quarters. Reporting annualized rates facilitates comparability between annual and quarterly growth, but can exaggerate change when series are volatile. The COVID-19 shocks do not indicate a contraction of US GDP by 31.4% in Q2 or expansion of 33.1% in Q3. It would take four quarters of compounded contraction or expansions at the same pace as reported for the US GDP to change by that amount. Real GDP contracted 9.0% in Q2 2020 compared to Q2 2019, and 2.9% in Q3 2020 compared to Q3 2019.
Source: US Bureau of Economic Analysis
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