Real GDP increased at a seasonally adjusted annual rate of 4.0% during the fourth quarter of 2020, according to the Bureau of Economic Analysis’s “advance” estimate. Real GDP increased 33.4 % in the third quarter of 2020.
The increase in fourth quarter GDP reflected continued efforts to reopen businesses and resume activities that were postponed due to COVID-19, as well as new restrictions and closures that took effect in some areas across the nation. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the fourth quarter of 2020 because of data limitations.
Real GDP increase in the fourth quarter was a result of positive contributions in exports, nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, and private inventory investment. These were partly offset by federal government and state and local government spending.
Consumption added 1.7 percentage points (pp) to growth, this follows a 25.44 pp addition during the third quarter of 2020. The increase in PCE was more than accounted for by spending on services (led by health care); however, spending on goods decreased (led by food and beverages). Inventories grew, adding 1.04 pp from GDP. Residential investment added a total of 1.29 pp to GDP.
Business investment added 1.73 pp to GDP growth. Investment in structures and intellectual property saw slight improvements, while investment in equipment added 1.30 pp.
Government spending fell, subtracting 0.22 pp from GDP. The federal government subtracted 0.04 pp while state and local governments subtracted 0.19 pp.
Read the BEA release.