Reopening gives big boost to U.S. economy

Economy revives after COVID-19 plunge, but could be temporary

The U.S. economy bounced back with a record yet temporary surge of growth in the third quarter as businesses reopened and stimulus cash powered consumer spending — reversing much of the collapse stemming from coronavirus lockdowns.

Just as the second-quarter plunge in output was the biggest in seven decades of data, so too was the recovery: Gross domestic product grew 7.4% from the prior period, a quarterly gain that equals an annualized pace of 33.1%, the Commerce Department's initial estimate showed Thursday.

The figure topped economists' estimates for a 32% increase, which was already well above forecasts three months ago for an 18% gain. Personal spending fueled the surge in growth, climbing an annualized 40.7%, also a record, while business investment and housing also posted strong increases.

While the report makes clear that the economy has found a solid footing for now, analysts caution that growth will be much more modest and choppy in months to come, especially as the spread of the virus gathers pace again and lawmakers remain in an extended deadlock over a new stimulus package.

Moreover, there are still nearly 11 million fewer workers on payrolls than there were before the pandemic hit, and analysts say a full recovery in GDP is at least several quarters away.

"To the extent that reopening drove the strength in Q3, not only have we already reopened but we may partially close a few things," said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. "That's really the elephant in the room when it comes to thinking about Q4."

Even with the outsize gain, GDP is 3.5% below its pre-pandemic peak, and the virus will keep business and jobs depressed in sectors like travel and restaurants.