The U.S. economy grew at a record-breaking 33.1% annual rate in the third quarter, the Commerce Department reported Thursday.
Economists had projected a 32% annualized rate of growth.
Even the quarter’s historic growth, though, was not enough to return the economy to pre-pandemic levels.
To return the economy to full health, growth in the third quarter would have had to increase 63.7% at an annual rate, projected David Wilcox, a former director of the Federal Reserve’s domestic economics division and now a senior fellow at the Peterson Institute for International Economics.
Thursday’s headline growth rate represents not the quarter-to-quarter growth in economic output but rather the growth in economic activity that took place last quarter as occurring for a full year.
The same growth, expressed as a month-over-month growth rate, was 7.4%
Output growth looked so strong for the third quarter because it represented many businesses returning to work after being shut down in the spring during the worst of the pandemic. In other words, it was a partial bounceback from the record-breaking economic contraction of 31.4%, annualized, in the second quarter.
President Trump is expected to campaign on the strong GDP number in the last few days before the election. Anticipating record quarterly growth, Trump has argued that the pandemic recovery is a “super-V,” meaning that the economy is returning to normal so quickly that a chart displaying GDP figures would display a “V” shape.
Less catch up growth is expected for the next quarter. “The pace of recovery has slowed in the last few months,” Wilcox said.
Consumer confidence decreased in October, the Conference Board announced on October 27, as households saw the jobs recovery from the pandemic slowing.
“There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with COVID-19 cases on the rise and unemployment still high,” said Lynn Franco, senior director of economic indicators at the Conference Board.
The index now stands at 100.9, down from September’s 101.8. The consumer confidence numbers are indexed to 1985, and a number at 100 or above signals that confidence is strong. The report shows that confidence is still in the positive territory but weakening.
“Expectations declined, driven primarily by a softening in the short-term outlook for jobs,” Franco said.
Fewer firms are also looking to add new workers in the fourth quarter, according to polling released October 26 by the National Association for Business Economics, making it harder for the economy to regain the millions of jobs lost in the pandemic.