GDP GROWTH: TRENDING IN Q4 2020

The U.S. economy improved in the fourth quarter with the nation’s gross domestic product rising at a 4% annualized rate. The Q4 report from the Commerce Department follows a record quarterly gain in the third quarter. But despite the strong second half, the U.S. economy contracted 3.5% in 2020. It was the first annual drop since the financial crisis and the most since 1946.

There is wide agreement that the economy will improve in 2021 as long as vaccinations proceed as planned. “We’re a long way from a full recovery,” Federal Reserve Chairman Jerome Powell said on the eve of the Commerce Department’s report in late January. “There’s nothing more important to the economy now than people getting vaccinated.”

Increased exports, nonresidential fixed investment, residential investment and inventories and consumer spending contributed to the fourth-quarter gain, while across-the-board declines in government spending at the federal, state and local levels weighed on growth, the Commerce Department said. Among businesses hit hardest in Q4 were restaurants as a wave of increased coronavirus infections and deaths made customers nervous about going out. The leisure and hospitality sector shed nearly 500,000 positions in December. The restaurant industry’s major trade group says 17%, about 110,000 establishments, are closed long-term or permanently.

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