Business & Investment

Fourth-quarter GDP shows that businesses have spent, but consumers are holding back

Workers wearing protective face masks will operate a forklift to move a box of face shields that can be shipped at the Hasbro manufacturing facility owned by Cartamundi in East Long Meadow, Massachusetts, on April 29, 2020.

Adam Grantsman | Bloomberg | Getty Images

In the fourth quarter, the economy continued to be sluggish, boosted by a surge in business spending due to consumer restraints.

Gross domestic product for the fourth quarter will be reported Thursday at 8:30 EST. According to Dow Jones, the economy is expected to show growth at an annualized rate of 4.3% from the previous quarter.

According to t, the economy is expected to shrink 3.5% in 2020 year-on-year.CNBC / Moody Analytics Rapid Update A survey of economists. It was during this year that a record pandemic plunge and recovery in activity was seen. After a sharp contraction of 31.4% in the second quarter, the economy in the third quarter grew by 33.4%. The first quarter was also hit by a pandemic, shrinking 5%.

Economists are monitoring the fourth quarter report for clues about how the economy entered the first quarter and how the pandemic shutdown had a serious impact on activity at the end of the fourth quarter.

“Maybe it’s enough to guarantee people that it won’t be negative in the first quarter. Private consumption has been negative for the third straight month,” said Chris Lupky, chief financial economist at MUFG Union Bank.

“Most of what we see is inventory buildup,” he added. “Inventory buildup can cause a couple of percentage points. It’s still growing, but not sustainable growth. It was low, but it’s now being rebuilt.”

Rupkey predicts that the economy will grow 5% in the fourth quarter and could grow 3.5% in the first quarter.

“I’m wondering what’s happening in the first quarter and whether the stimulus will boost the economy enough to avoid the negative quarter, so it’s a little more in the rearview mirror,” Rupky said. Told. He said a $ 600 stimulus check sent to individuals should help spend in the first quarter.

Barclays economists said Wednesday’s durable consumer goods report showed strong corporate spending in the fourth quarter.

“These estimates herald the continued strength of business investment in the quarter and quarter,” said an economist. They currently estimate business equipment spending to increase by 27.4% in the fourth quarter compared to the third quarter, up from 21.4% before the latest durable consumer goods report.

“December’s key capital goods numbers put capital spending on track for another strong profit in the fourth quarter of 2020, suggesting a solid carryover effect on growth in the first quarter,” economists said. There are. “

Fourth-quarter GDP shows that businesses have spent, but consumers are holding back Fourth-quarter GDP shows that businesses have spent, but consumers are holding back

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