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America just posted its biggest annualized and single-quarter GDP growth of all time. It isn't that impressive.
The U.S. GDP jumped at a 33.1 percent annualized rate in the third quarter, a growth of 7.4 percent from Q2, Commerce Department records released Thursday reveal. But as Gregory Daco, the chief U.S. economist at Oxford Economics, put it in a tweet, that growth is both "record-breaking and meaningless at the same time."
It's true that the 7.4 percent GDP rise from Q2 to Q3 is a record. But it also comes after a record contraction from Q1 to Q2, and a total loss of 10.3 percent throughout 2020, so it doesn't even come close to making up what was lost amid the pandemic. In fact, the 3.5 percent total GDP shrinkage during 2020 "means we are still down almost as much as we were during the height of the Great Recession," tweets Diane Swonk, chief economist at Grant Thornton.
Translation into % difference from pre-#Covid
US #GDP -3.5%
- consumer spend -3.3%
- business investment -4.9%
- residential invest +5.1%
- exports -15.3%
- imports -7.1%
- federal gov spending +2.6%
- state and local gov spending -1.9% pic.twitter.com/uLNPEnuUYF
— Gregory Daco (@GregDaco) October 29, 2020
Economist Justin Wolfers meanwhile debunked the 33.1 percent growth rate the entire Trump family was touting Thursday morning. Looking at annualized growth reveals how much bigger the economy would be if it "grew at this rate for the next three quarters," Wolfers tweeted. "But there's no chance that will happen, so the annualized rate answers a question no one is asking." And if that wasn't convincing enough, Wolfers had another way of looking at it. Kathryn Krawczyk
If you have a cranky uncle who insists that you focus on annualized rates, point out that the number of new covid cases in Q3 rose to be +87% higher than in Q2, which is an annualized rate of +1,123%.
— Justin Wolfers (@JustinWolfers) October 29, 2020