November 25, 2020

The revised estimate of third quarter GDP was unchanged at 33.1% after having fallen 31.4% in the second quarter.  Both swings were record-breaking quarterly changes..  Led by consumer spending and housing, GDP surged in the third quarter and these two sectors are showing no sign of slowing down.  As a result, we expect fourth quarter GDP to continue to climb by 10.0% as the economy continues to bounce back.  Keep in mind, too, that as we get towards the end of the year we should be getting close to having a vaccine which will give the economy a significant boost.  For that reason we expect GDP growth of 5.5% in 2021.

Final sales, which is GDP excluding the change in business inventories rose 25.5% in the third quarter after having declined 28.1% in the second quarter.

Final sales to domestic purchasers excludes both the change in inventories and trade rose 29.4% in the third quarter after having fallen 27.1% in the third quarter.

Consumption spending jumped 40.6% in the third quarter after having plunged by 33.2% in the second quarter.   Indeed, consumption spending accounted for 25.3% of the overall GDP increase in the third quarter.  Health care by itself accounted for 7.6% of the GDP increase as elective surgeries recovered..  Food and services and accommodations accounted for another 4.2% or so.  Recreation services accounted for another 2.4%.  And transportation spending (think airfares) accounted for 1.7%.


Nonresidential investment fell climbed by 21.8% in the third quarter after having declined 27.2% in the second quarter. The increase was entirely attributable to equipment spending which surged by 66.6%.  Spending on structures declined in the third quarter.  Spending on intellectual property rose 6.0%.

Residential investment jumped 62.3.3% in the third quarter after having dropped by 35.6% in the second quarter.  Housing is hot.  Certainly a record low level of 2.8% mortgage rates are a large reason why.  Also renters in expensive metropolitan areas like New York, Chicago, and San Francisco are abandoning the city for more affordable housing in the suburbs.  Sales in resort communities like Lake Tahoe, the Jersey shore, and the mid-Atlantic beaches are booming.

The foreign sector as measured by the deficit for real net exports In the third  quarter widened by $241.3 billion to $1016,4 billion.   Exports surged by 60.5% in the third quarter while imports rose even more dramatically by 93.1%.  These results suggest that the rebound in the U.S. economy is outpacing the pickup in growth overseas.

Federal government spending fell 6.2% in the third quarter after having jumped 16.4% in the second quarter.  Defense spending climbed 3.1% but non-defense spending declined by 18.1% in the third quarter after having surged by 37.6% in the second quarter as the government sent out $1,200 tax refund checks to every taxpayer..

Following the record-breaking 31.4% decline in second quarter GDP and a rebound of 33.1%  in the third quarter, we expect an additional 10.0% growth rate in Q4 and 5.5% growth in 2021..

Stephen Slifer


Charleston, SC