US economy contracts 3.5% in 2020; worst show since WWII
GDP increases at 4% annualised rate in Q4 as virus continues to hurt economy
The US economy contracted at its sharpest pace since World War Two (WWII) in 2020 as Covid-19 ravaged services businesses like restaurants and airlines, throwing millions of Americans out of work and into poverty.
The Commerce Department’s snapshot of fourth-quarter gross domestic product on Thursday also showed the recovery from the pandemic losing steam as the year wound down amid a resurgence in coronavirus infections and exhaustion of nearly $3 trillion in relief money from the government.
President Joe Biden has unveiled a recovery plan worth $1.9 trillion, and could use the GDP report to lean on some lawmakers who have balked at the price tag soon after the government provided nearly $900 billion in additional stimulus at the end of December.
The economy contracted 3.5 per cent in 2020, the worst performance since 1946. That followed 2.2 per cent growth in 2019 and was the first annual decline in GDP since the 2007-09 Great Recession. The economy plunged into recession last February In the fourth quarter, GDP increased at a 4.0 per cent annualised rate as the virus and lack of another spending package curtailed consumer spending, and partially overshadowed robust manufacturing and the housing market. GDP growth for the last quarter was in line with forecasts in a
poll of economists.
The big step-back after a historic 33.4 per cent growth pace in the Julyseptember period left GDP well below its level at the end of 2019. With the virus not yet under control, economists are expecting growth to further slow down in the first quarter of 2021, before regaining speed by summer as the additional stimulus kicks in and more Americans get vaccinated.
Street rises, shrugs off bleak data
Wall Street's main indexes rose on Thursday, as a reversal of declines in mega-cap technology stocks helped investors look past data which showed another sharp contraction in the US economy. The Dow Jones Industrial index was up 537 points at 30,840 as of 9:53 pm (IST). The Nasdaq was up 124 points at 13,390 at the same time.
Microsoft, Facebook, Netflix and Alphabet were up during early trade.