U.S. Economy Unexpectedly Grows More Than Previously Estimated In Q4

Economic activity in the U.S. unexpectedly grew faster than previously estimated in the fourth quarter of 2020, according to revised data released by the Commerce Department on Thursday.

The report showed real gross domestic product surged up by 4.3 percent in the fourth quarter compared to the previously reported 4.1 percent jump. Economists had expected the pace of GDP growth to be unrevised.

The Commerce Department said the stronger than previously estimated growth primarily reflected an upward revision to private inventory investment that was partly offset by a downward revision to non-residential fixed investment.

Despite the upward revision, the GDP growth in the fourth quarter still reflects a substantial slowdown from the 33.4 percent spike seen in the third quarter.

The GDP growth in the fourth quarter reflected increases in exports, non-residential fixed investment, consumer spending, residential fixed investment, and private inventory investment.

However, decreases in state and local government spending as well as federal government spending partly offset the positive contributions along with an increase in imports, which are a subtraction in the calculation of GDP.

The report also showed real GDP decreased by 3.5 percent in 2020 compared with an increase of 2.2 percent in 2019.

For the full year, decreases in consumer spending, exports, private inventory investment, non-residential fixed investment, and state and local government were partly offset by increases in federal government spending and residential fixed investment.

“This year, the economy is poised to see the fastest rate of real GDP growth since the early 1980s as improving health conditions, expanding vaccine distribution, and generous fiscal stimulus will form a powerful growth cocktail,” said Lydia Boussour, Lead U.S. Economist at Oxford Economics.

She added, “After a 3.5% contraction in 2020, we foresee the economy expanding 7% in 2021 with annualized growth averaging close to 10% in the spring and summer.”

On the inflation front, the report showed growth in core consumer prices, which excludes food and energy prices, slowed to 1.3 percent in the fourth quarter from 3.4 percent in the third quarter.

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