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GDP Grows at Record 33.1% in Q3, but Questions Remain About a Coronavirus Rebound.

By David Butler – Updated Oct 29, 2020 at 9:09AM

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The number represents a return to normal, more than a gain.

After the extreme decline of 31.4% in gross domestic product (GDP) that the U.S. economy experienced in the second quarter, the bounce back produced the largest economic surge ever for the third quarter at 33.1%. Estimates had expected GDP of 32%, but this growth is largely caused by the pandemic, rather than traditional economic growth. When you shut down the economy, the reopening will be quite a big number.

Within the economic data, the biggest surprise was personal consumption, which increased by 40.7%, compared to estimates of 38.9%. The market reacted softly to the news, with the S&P 500 up just under 1% this morning.

artwork of stimulus flag, capitol building, stimulus checks

Image source: Getty Images

It's important to remember that the GDP figure represents more of a return to normal, rather than a gain. The country is still facing an uncertain economic situation heading into the end of the year. Surges in COVID-19 cases are putting fear into the market and, more importantly, continued pressure on the underlying businesses within the economy.

The number of jobless claims were lower than expectations for last week. Still, initial jobless claims were 751,000 for the week ended Oct. 24. While these claims have progressively declined since April, they are still well above pre-COVID numbers. Looking ahead, this will be an important metric to monitor.

For the fourth quarter, a resolution on further stimulus will likely be the key factor in economic developments. The stock market has been weary as stimulus talks have waned. The only thing that holds more sway at the moment is whether COVID-19 cases escalate to levels forcing further social-distancing measures. Another labor shock would change the discussion entirely.

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