Gross economic output data by industry is now available through the third quarter of 2020. Value added and intermediate input data by industry are also available through the third quarter. Although the underlying fourth quarter data is not yet published, the Bureau of Economic Analysis has published an “advance estimate” of GDP for the fourth quarter and the year in total. While the estimate is subject to revision and even previous quarterly data can be revised in the future, the year-end GDP data is the first full accounting of the economic effects of the pandemic and associated mitigation efforts for the year as a whole. Unemployment rate information and inflation rate information are also now available for 2020 as a whole. According to the advance estimate, GDP was down 3.5 percent for 2020, a much smaller drop than we anticipated and many feared. The decline in the first quarter of 2020 of 5.0 percent and the precipitous drop of 31.7 percent in the second quarter were quickly reversed in the third quarter by a remarkable 33.4 percent increase, followed by an estimated 4.0 percent increase in the fourth quarter. The extraordinary plummet and equally sudden snap back in the third and fourth quarters are clear indicators of the direct effects of changes in economic activity not driven primarily by changes in underlying conditions but by extraneous limits on business operations due to public health measures and their subsequent lifting. While this was always expected, the exact magnitude of forced closures and the exact speed of reopenings was harder to predict. The continued growth that apparently occurred in the fourth quarter is further evidence of the signs of resilience we noted in September and the strong desire across all sectors to resume something approximating normal as much and as quickly as possible. This bodes well for the future, especially with the further relief and stimulus packages being enacted at the federal level. There were a variety of factors associated with the more rapid recovery in the third and fourth quarters than was previously expected. Increases in exports, business equipment purchases, manufacturing and wholesale trade were larger and more rapid than forecast, as the economy prepared for greater anticipated recovery in 2021. Increases in spending on the purchase of new homes and/or the repair, renovation or expansion of existing homes was already occurring and continued as people suddenly had more time to focus on their living space and less restrictions on its location due to remote working. One small example is a sudden explosion of above ground pool installations for families with children deprived of their normal summer activity outlets. The shift from eating out to dining at home resulted in a jump in retail purchases of foodstuffs and of related kitchen tools and equipment. Similarly, money previously spent on airfare and hotel stays suddenly shifted to RV and cabin/second home purchases. Personal savings rates also declined, pumping or leaving more dollars in the current economy. Despite that shift (and likely one of its causes), disposable personal income continued to fall, down a combined total of over $1 trillion in the final two quarters of 2020.
∴ GENERAL ECONOMIC CONDITIONS
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