U.S. ECONOMY SHRANK 3.5% IN 2020 DESPITE 4% GROWTH IN 4TH QUARTER
Stuck in the grip of a viral pandemic, the US economy grew at a 4% annual rate in the final three months of 2020 and shrank last year by the largest amount in 74 years, Martin Crutsinger reported for Associated Press (AP).
For 2020 as a whole, a year when the coronavirus inflicted the worst economic freeze since the end of World War II, the economy contracted 3.5% and clouded the outlook for the coming year. The economic damage followed the eruption of the pandemic 10 months ago and the deep recession it triggered, with tens of millions of Americans left jobless.
Thursday’s report from the Commerce Department estimated that the nation’s gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter from a record 33.4% surge in the July-September quarter.
That gain had followed a record-shattering annual plunge of 33.4% in the April-June quarter, when the economy sank into a free-fall.
The pandemic’s blow to the economy early last spring ended the longest US economic expansion on record — nearly 11 years.
The damage from the virus caused GDP to contract at a 5% annual rate in last year’s January-March quarter. Since then, thousands of businesses have closed, nearly 10 million people remain out of work and more than 400,000 Americans have died from the virus.
The government’s report showed that consumer spending, which accounts for about 70% of the economy, slowed sharply last quarter to a 2.5% annual gain from a 41% surge in the July-September quarter, when the economy had staged a powerful initial comeback.
Last quarter’s economy was instead driven in part by business investment and housing, which has been a star performer during the past year, reflecting record-low mortgage rates and a demand for more household space. Housing grew at a sizzling 33.5% annual rate, business investment at a 13.8% rate.
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