US grows at sizzling 33% in 3rd quarter

WASHINGTON — After the worst downturn on record, the US economy posted the strongest recovery on record as it expanded at a 33.1 per cent annual rate in the third quarter, the Commerce Department reported on Thursday.

That came after a 31.4 per cent drop in the April-June period during the worst of the Covid-19 pandemic, and a five per cent drop in the first quarter. The annual rate is a measure that shows the full-year result if the gain in a single quarter were translated over 12 months.

The massive gain was driven by a surge in spending by consumers and businesses. —

washington — The US Labour Department on Thursday said 751,000 people filed for state unemployment benefits in the week ending October 24, compared to 791,000 in the previous period, amid a spectacular growth in the economy.

Though claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak seen during the 2007-09 Great Recession.

The US economy grew at a record pace of 33.1 per cent in the third quarter as the government injected more than $3 trillion worth of pandemic relief which fueled consumer spending, but the deep scars from the Covid-19 recession could take a year or more to heal.

Personal income tumbled at a $540.6 billion rate in the third quarter after surging at a $1.45 trillion pace in the second quarter. The decrease in income was attributed to declines in government transfers related to the pandemic relief programs. With the labour market recovery slowing, the outlook for consumer spending is cloudy.

Just over half of the 22.2 million jobs lost during the pandemic have been recouped, and layoffs persist.

Consumer spending, which accounts for more than two-thirds of the US economy, rebounded at a historic rate of 40.7 per cent in the third quarter, driven by purchases of goods like motor vehicles, clothing and footwear. Spending on services increased, thought it remained below its fourth quarter level.

Spending was boosted by billions of dollars in government transfers, including a $600 weekly unemployment subsidy and a one-off $1,200 check to households.

The shift toward goods spending pulled in imports, resulting in a widening of the trade deficit. Some of the imports, however, ended up in warehouses. The accumulation of inventory offset the trade hit to GDP growth.

There was also a turnaround in business investment after the second- quarter drubbing, but economists believed the bounce would be temporary as demand for goods that do not complement lifestyle changes brought by Covid-19 remains weak.

The housing market was another star performer, thanks to historic low interest rates. But government spending was a drag as transfers happened in the second quarter. Government spending was also pressured by cuts at state and local governments, whose finances have been squeezed by coronavirus. —