Bigger gains in business investment, housing
and exports were offset by downward revisions
to state and local government spending,
business inventories and consumer spending.
The 33.1% gain was the largest quarterly gain on
records going back to 1947 and surpassed the
old mark of a 16.7% surge in 1950.
Still, the economy has not fully recovered from
output lost in the first six months of the year
when GDP suffered a record-shattering drop
of 31.4% in the second quarter. That followed a
slide at an annual rate of 5% in the first quarter
as when the pandemic shut down much of the
economy and triggered millions of layoffs.
Economists are concerned that growth
has slowed sharply in the current October-
December and there are fears that GDP could
dip back into negative territory in the first three
months of next year.
Mark Zandi, chief economist at Moody’s
Analytics, said he had forecast GDP growth of
around 2% in the fourth quarter, with the real
possibility of GDP turning negative in the first
quarter of next year.
Economists at JPMorgan Chase have trimmed
their forecast for the first quarter to a negative
1% GDP rate. “This winter will be grim and we
believe the economy will contract again in the
first quarter,” the JPMorgan economists wrote in
a research note.
“The economy is going to be very uncomfortable
between now and when we get the next fiscal
rescue package,” Zandi said. “If lawmakers can’t
get it together, it will be very difficult for the
economy to avoid going back into a recession.”