US 4Q Growth Rate at 4% Last Year... Worst Annual Performance Since WWII

Year-end Shopping Season Falls Short of Expected 4.3% Growth
Impact of COVID-19 Resurgence
Annual Growth Rate -3.5%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The US economic growth rate in the fourth quarter of last year was only 4% (annualized). Despite the year-end shopping season, it failed to overcome the limitations caused by the resurgence of COVID-19.

The US economy shrank by 3.5% on an annual basis. This is the worst performance since World War II.

On the 28th (local time), the US Department of Commerce announced that the economic growth rate for the fourth quarter of last year was 4%. This fell short of the Dow Jones consensus forecast of 4.3%.

The US economy experienced negative growth of -5.0% in the first quarter and -31.4% in the second quarter due to the impact of COVID-19, then rebounded by 33.4% in the third quarter, but the growth in the fourth quarter fell short of expectations amid a severe resurgence of COVID-19.

The stagnation in growth was due to a decrease in consumer spending as the government’s stimulus measures were delayed amid the severe COVID-19 pandemic. The manufacturing sector and housing market boom alone had limitations in driving up the growth rate.

Concerns are growing that the sluggish economic growth in the fourth quarter will continue into the first quarter of this year. A major foreign news outlet reported that many economists are worried that the first quarter growth rate could slow further due to the resurgence of COVID-19. It is expected that growth will only return to a recovery trend after additional stimulus measures are implemented and COVID-19 vaccinations are further expanded.

The International Monetary Fund (IMF) recently estimated that the US economy will grow by 5.1% this year. The forecast by economists compiled by the Wall Street Journal was 4.3%.

Employment recovery remains a challenge for the US economy. On the same day, the US Department of Labor announced that new unemployment claims for the week of January 17?23 totaled 847,000. Although this decreased from the 900,000 range for two consecutive weeks to the 800,000 range, it is still far from recovering to pre-COVID-19 levels.