US GDP surged a record 33% in the 3rd quarter as the economy reopened, roughly double the next-biggest jump

By Ben Winck, Business Insider–

• US gross domestic product grew at a record 33.1% annualized rate in the second quarter, the Commerce Department said on Thursday.
• The jump follows the second quarter’s 31.4% annualized slump, and roughly doubles the next-biggest increase across history. Economists surveyed by Bloomberg expected a 32% increase.
• The GDP reading caps a quarter of economic reopening and revived business activity throughout the country.
• Still, the 33% increase doesn’t fully offset the prior quarter’s decline. Experts warn a full recovery may take years, as the pace of GDP growth is set to moderate significantly in the last three months of 2020.

Just as the coronavirus’ toll drove a record plunge in economic output, the US’s summer recovery fueled the largest-ever jump in gross domestic product.

US gross domestic product grew at an annualized rate of 33.1% in the third quarter, the Commerce Department said on Thursday. The reading marks the largest output gain in recorded history, based on data going back to the 1940s. It came in roughly double the next-biggest jump seen in 1950. Economists surveyed by Bloomberg expected a 32% gain.

The reading represents how much the economy would’ve grown had the third-quarter rate lasted for a year. It’s a sharp reversal from the second quarter, which saw a 31.4% annualized rate of contraction.

Thursday’s figure is also the first of three estimates published by the Commerce Department, and could be revised in the coming months.

The historic rebound was led by the gradual reopening of businesses and revitalized spending activity. As quarantine orders eased, Americans used cash from the $2.2 trillion CARES Act to revive the economy from its frozen state.

Yet the V-shaped trendline in GDP growth glosses over the recovery’s nuances. More frequently updated indicators such as nonfarm payrolls, credit-card spending, and purchasing managers’ indexes slowed their pace of recovery through the end of the summer.

Roughly half of the Americans who lost their jobs in the pandemic remain unemployed. Consumer spending enjoyed a sharp bounce-back before easing to a more moderate growth rate.

And while the 33% GDP increase initially seems to offset the second-quarter slump, it doesn’t place overall output back at its pre-pandemic highs. Third-quarter growth would have needed to reach roughly 46% to balance out the record downturn.

Economists warn a full recovery may take years, as fourth-quarter growth is expected to land well below Thursday’s blockbuster reading.

The recovery also faces risks from soaring COVID-19 case counts. Some countries in Europe have already reinstated lockdowns as coronavirus infection rates and death tolls leap to record highs, leaving some fearing the US could take similar steps.

Should the economy continue to bounce back amid the virus resurgence, it needs to do so without fresh fiscal stimulus. The CARES Act has been widely praised as a primary driver of the third quarter’s sharp improvement, but aid allocated in the bill has largely expired.