US Economy Expands 4% in 4Q20 but Ends 2020 with a Contraction of 3.5%

The US GDP expanded at a 4.0% annualized rate in the last quarter of 2020, showing a continued economic recovery from the sharp declines amid the ongoing pandemic, but for the full year, the economy has contracted 3.5%, the biggest drop in nearly 8 decades.  

 

The economic increment reflected increases in exports, nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending and federal government spending, the Commerce Department’s Bureau of Economic Analysis said in its report Thursday.

 

“The increase in fourth quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States,”, said the report.

 

Despite the full year economy decreasing 3.5% compared with an increase of 2.2% in 2019, marking the first contraction in economic activity since 2009, and the biggest drop since 1946, the GDP is now only 2.5% below pre-pandemic levels.