United States economic activity in the third quarter grew at an annual rate of 33.1 percent in a second estimate, after a sharp contraction in the previous quarter, the Commerce Department reported Wednesday.
Despite the seemingly fast rebound, the United States economy in the third quarter was down by 2.9 percent compared with that a year ago, according to a report released by the department’s Bureau of Economic Analysis (BEA).
The economy is still about 3.5 percent smaller than it was at the end of the last year, before it was ravaged by the COVID-19 pandemic.
The rebound in the third quarter came after the economy plunged at a revised annual rate of 31.4 percent in the second quarter amid mounting COVID-19 fallout, which has been the largest decline since the United States government began keeping records in 1947.
The growth in real gross domestic product in the third quarter reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment that were partly offset by decreases in federal government spending, as well as state and local government spending, the BEA report showed.
With the second estimate, upward revisions to nonresidential fixed investment, residential investment, and exports were offset by downward revisions to state and local government spending, private inventory investment, and PCE, according to the report.
The BEA report was released as COVID-19 cases are surging across the country. Nearly 1.2 million new cases were reported in the last seven days, according to the data updated by the United States Centers for Disease Control and Prevention on Tuesday.
In response to spikes in infections, governors across the country have recently reinstated restrictive measures to curb the spread of the virus, casting shadow over economic recovery going forward.
Meanwhile, the latest weekly jobless claims report showed that the United States labor market recovery is slowing amid surging COVID-19 cases.
The extra 600-dollar weekly unemployment benefits from the federal government, as well as some other relief measures approved in late March, expired at the end of July, but Congress and the White House remained deadlocked over the next round of fiscal support.
United States Federal Reserve Chairman Jerome Powell recently renewed his call for Congress to roll out more fiscal support, saying that fiscal policy, which includes taxing and spending, can provide “direct, targeted income support” for groups that really need it.
Despite recent news on vaccine development, Powell cautioned that significant downside risks for the economy remain, as widespread vaccination is still months away even in the best case.