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January 28, 2021US GDP 2020 Q4 (ADVANCE ESTIMATE) 
The Bureau of Economic Analysis (BEA) released the Q4 2020 US Real Gross Domestic Product (GDP) "advance" estimate today. The US economy grew 4.0% in Q4 after an increase of 33.4% (seasonally adjusted annualized rate, chained 2012 dollars) in Q3 2020. The Q4 GDP estimate reflects continued economic recovery from the sharp declines earlier in the year, as well as ongoing impacts of new COVID-19 restrictions and closures. The 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 Q4 2020 was 2.5% smaller than in Q4 2019.
Increase GDP for Q4 reflected positive contributions from exports, non-residential fixed investment, personal consumption, residential fixed investment, and private inventory investment. These gains were partly offset by decreases in state and local government spending and federal government spending, and a rise in imports.
Personal consumption expenditure growth was 2.5% in Q4 (in real terms at an annualized rate) following a 41.0% increase in Q3. Services growth (+4.0%) was led by increases in health care, while the decline in goods (-0.4%) was led by food and beverage. Personal consumption expenditure was 2.6% smaller in Q4 2020 compared to Q4 2019.
Residential investment growth (+33.5%) primarily reflected investment in new single-family housing. Residential investment activity in Q4 was 13.7% above Q4 2019 levels. Non-residential fixed investment increased 13.8% in Q4 (at an annualized rate).
Export growth was 22.0% in Q4 (real terms at annualized rates) following an increase of 59.6% in Q3. Export growth primarily reflected an increase in goods, led by industrial supplies and materials. Compared to Q4 2019, goods exports were 3.6% lower and service exports were 24.1% lower in Q4 2020.
US nominal GDP increased at an annual rate of 6.0% in Q4, following an increase of 38.3% in Q3. The personal consumption expenditure price index increased 1.5% compared to a 3.7% increase in 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 growth in US GDP of 33.4% in Q3 or 4.0% in Q4. It would take four quarters of compounded growth at the same pace as reported for US GDP to change by these amounts. Real GDP contracted 2.8% in Q3 2020 compared to Q3 2019, and 2.5% in Q4 2020 compared to Q4 2019.
Source: US Bureau of Economic Analysis
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