US GDP finished 2020 on a positive note, rising by 4.0% in the fourth quarter, the Bureau of Economic Analysis reported today.
US GDP gains — but falls short of expectations
With that said, US GDP gains in Q4 fell short of expectations. The country continued to deal with the impact of the coronavirus pandemic and intermittent restrictions related to the crisis.
The increase slowed considerably from the previous quarter, when it gained by 33.4%.
“The increase in fourth quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States,” the Bureau of Economic Analysis said.
Meanwhile, US GDP for 2020 as a whole retraced by 3.5%, the largest decline since 1946.
Personal income declines
While US GDP increased in Q4 2020, personal income declined, the BEA reported.
Current-dollar personal income fell by $339.7 billion in Q4 2020, compared with a drop of $541.5 billion in Q3 2020.
Furthermore, disposable income decreased $372.5 billion in Q4 2020, or by 8.1%. In Q3 2020, disposable income fell by 13.2%, or by $638.9 billion.
Disposable income is one important indicator of economic health or distress — in short, do people have money to spend? Some sectors did some recovery as 2020 progressed, like automotive, which bounced back after idling production for two months from March-May.
However, the scale of job losses remains significant.
Nonfarm payroll employment fell by 140,000 in December, the Bureau of Labor Statistics (BLS) reported earlier this month. Manufacturing employment rose by 38,000, with a rise of 7,000 for motor vehicles and parts.
The US unemployment rate remained at 6.7%.
“The decline in payroll employment reflects the recent increase in coronavirus (COVID-19) cases and efforts to contain the pandemic,” the BLS reported.
Lower levels of disposable income means less demand for consumer products. In turn, that impacts metals demand, metalmaking raw materials demand and demand for relevant commodities, like oil (oil is among the macroeconomic indicators MetalMiner considers in its Annual Outlook report).
COVID-19 cases have surged in the winter months. As a result, some state and local governments have imposed renewed restrictions on businesses and other social gatherings. Furthermore, the US is also dealing with the uncertainty surrounding variants of the virus, including the B.1.1.7 strain first identified in the United Kingdom.
The Centers for Disease Control and Prevention recently reported the B.1.1.7 strain, which appears to be significantly more transmissible, has the “potential to increase the U.S. pandemic trajectory in the coming months.”
With the economic recovery losing some steam, the success of a speedy vaccination rollout will prove critical. Furthermore, President Joe Biden’s proposed $1.9 trillion stimulus package, if Congressional Democrats utilize procedural measures to pass it without Republican support, would offer a jolt of confidence to markets and another round of stimulus checks for many Americans who have been left out of what has been dubbed a “K-shaped” recovery to date.
U.S. GDP figures by industry are scheduled to be released March 25, 2021.
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