What Is the Current US GDP Rate?
The current U.S. gross domestic product (GDP) growth rate is 4.3% for the fourth quarter of 2020. That's according to the fourth-quarter third estimate from the Bureau of Economic Analysis (BEA). It means that the economy grew 4.3% between October and December compared to the previous quarter.
The GDP rate for the second quarter of 2020 showed a large contraction. The Q2 GDP rate was -31.4%, meaning the economy contracted at a rate of 31.4% between April and June 2020. That was the worst quarterly contraction in U.S. history. It came after the National Bureau of Economic Research declared that a recession began in February 2020. The economy contracted in the first half of 2020 because of the COVID-19 pandemic. The second-worst contraction in history was 10.0% in the first quarter of 1958.
With the fourth-quarter third estimate of 4.3%, the U.S. economy is above the ideal growth rate of between 2% and 3%. That ideal rate is fast enough to provide sufficient jobs, but not so fast it will create inflation or an asset bubble. That's not a concern now because the economy is recovering from such a huge downturn. Despite its record growth, the economy only recovered about three-fourths of the prior decline, according to economist Scott Hoyt of Moody’s Analytics.
Growth was slowed in Q4 due to the increase in COVID-19 cases and new business closures. Personal consumption expenditures increased by 2.3%.
Real GDP—which removes the effects of inflation—was $18.8 trillion. The current-dollar GDP, also known as nominal GDP, does not remove the effects of inflation and was $21.5 trillion. In other words, if all the companies and people in the U.S. kept producing at that rate for a year, they'd make $21.5 trillion in goods and services.
The 4.3% is the change in real GDP between the fourth quarter—October through December—and the third three months of 2020. It's expressed as an annualized rate. For a wider comparison, we tracked the growth rate from 2007 to 2020. The grey bar shows the ideal growth rate of between 2% and 3%.
The BEA releases the GDP report toward the end of each month. There are three releases for each quarter:
- Advance estimate: Released one month after the quarter ends, it's often wildly different from the third estimate simply because all the trade and business inventory data is not in yet.
- Second estimate: More realistic, this one comes out two months after the quarter ends.
- Third estimate: Released three months after the quarter, it usually only tweaks the second estimate.
US GDP Changes by Quarter
For each quarter below, the most recent estimates are first, including a breakdown, and then prior estimates are included. A record of these revisions isn't readily available anywhere else.
2020 Quarterly GDP
Real GDP declined by 3.5% in 2020.
The largest component of GDP is consumer spending. It contributes to almost 70% of the economy. In the BEA's third estimate for Q4, it rose by 4.3%. Spending on durable goods, or long-lasting things like automobiles, furniture, and large appliances, dropped by 1.1% from Q3. Spending on nondurable goods, such as groceries and gasoline, decreased by 1.6%. Sales to services increased by 4.3%.
Business investment increased by 18.6%. It was mostly driven by investment in equipment, which rose by 25.4%, and residential construction, which saw an increase of 36.6%.
Exports increased by 22.3% and imports rose by 29.8%.
Federal government spending declined by 0.8%. State and local spending decreased by 0.8% as tax revenues fell. States and cities, unlike the federal government, must keep a balanced budget.
In Q3, consumer spending rose by 41.0% as shoppers hit the stores after some pandemic restrictions were lifted. Spending on durable goods skyrocketed 82.7%—a large jump from Q2. Spending on nondurable goods increased by 31.1% and sales to services rose by 38.0%.
Business investment increased by 86.3%. It was mostly driven by investment in equipment which rose by 68.2%—much higher than it was in Q2. Only a few areas saw a decline, including commercial construction, which is mostly apartment buildings; it fell another 17.4% after seeing a decline in Q2. Many workers abandoned their offices when they began working from home. This may have contributed to the rise in residential construction, which saw an increase of 63.0%, making many people wonder if this is a real estate bubble that will crash.
An increase in exports increases GDP, while an increase in imports lowers it. As the dollar's value strengthens, it makes exports more expensive.
Federal government spending declined by 6.2%, as administrative costs related to CARES Act and other stimulus packages fell. State and local spending decreased by 3.9%.
The BEA's third and final estimate for the second quarter of 2020 was a decline of 31.4%. Consumer spending fell by 33.2%. Spending on durable goods only dropped by 1.7% while nondurable goods spending fell by 15%. Sales to services fell by a painful 41.8%.
Business investment plummeted by 46.6%. The biggest drop was the investment in equipment, which fell by 35.9%. Commercial construction didn't do much better, declining by 33.6%. Homebuilding shrank by 35.6%.
Exports fell by 64.4% and imports fell by 54.1% as international trade ground to a halt. Federal government spending rose by 16.4%, as Congress launched over $2 trillion in stimulus measures. State and local spending fell by 5.4%.
The BEA's advance estimate was a drop of 32.9%. The second estimate was a decline of 31.7%.
The BEA's third and final estimate for the first quarter of 2020 was a decline of 5.0%. Consumer spending fell by 6.9%. Spending on durable goods plummeted by 12.5%, while spending on nondurable goods rose by 7.1%. Sales to services fell by 9.8%.
Business investment fell by 9.0%. Investment in equipment fell by 15.2%. Commercial construction fell by 3.7% and residential construction rose by 19.0%.
Exports fell by 9.5% and imports fell by 15.0%. Federal government spending rose by 1.6%, while state and local spending rose by 1.1%.
The BEA's advance estimate was a decline of 4.8%. Its second and third estimates were both 5.0% drops.
2019 Quarterly GDP
Real GDP grew 2.2% in 2019.
The fourth quarter of 2019 saw a 2.4% increase, just slightly higher than the BEA's original estimates of 2.1%. Consumer spending rose by 1.6%. Durable goods orders rose by 3.1%, while those for nondurable goods fell by 0.7%. Spending on services rose by 2.0%.
Business investment fell by 3.7%. Investment in equipment fell by 1.7%, while commercial construction fell by 5.3%. Residential construction rose by 5.8%.
Exports rose by 3.4%, while imports fell by 7.5%. Federal government spending rose by 4.0% thanks to military spending, which increased by 6.6%. State and local spending rose by 1.5%.
The BEA kept its estimate at 2.1% for the advance, second, and third estimates.
The BEA thought the third quarter of 2019 would see a 1.9% increase, but it actually increased by 2.6%. Consumer spending rose by 2.7%. Spending on durable goods rose by 6.3% and nondurable goods by 3.1%. Spending on services rose by 2.0%.
Business investment rose by 1.8%. Investment in equipment fell by 1.7%, while commercial construction rose by 3.6%. Residential construction rose by 4.6%.
Exports rose by 0.8%, while imports increased by 0.5%. Federal government spending rose by 4.8%, driven by a 5.6% rise in military spending rose. State and local spending rose by 0.6%.
The BEA's advance estimate was 1.9%, while the second estimate was 2.1%. The third estimate was also 2.1%.
The BEA originally thought GDP would see an increase of 2.1%, but it actually only rose 1.5%. Consumer spending increased by 3.7%. Spending on durable goods rose 12.7%, while spending on nondurable goods rose by 5.3%. Spending on services increased by 1.9%. Business investment fell 5.8%. Investment in equipment was down 3.8%, while commercial construction was up 1.6%. Residential construction was down 2.1%.
Exports fell by 4.5% while imports rose by 1.7%. Federal government spending rose 9.2%, boosted by a 4.4% increase in military spending. State and local spending rose by 2.6%.
The BEA's advance estimate was 2.1%, while the second estimate was 2.0%. The third estimate was 2.0%.
The BEA originally thought the first quarter of 2019 would see a 3.2% increase, but it actually saw a slightly smaller bump at 2.9%. Consumer spending rose by 1.8%. That's typical for the first quarter because it's right after the holiday shopping season. Spending on durable goods rose by 1.0%, and spending on nondurable goods rose by 3.3%. Spending on services rose by 1.5%.
Business investment rose by 3.9%. Investment in equipment increased by 2.0%. Commercial construction rose 8.2%, while residential construction dropped 1.7%.
Exports rose by 1.8% while imports fell 2.1%, which adds to GDP. Federal government spending rose by 1.3% even though military spending rose 5.6%. State and local spending rose by 3.2%.
The BEA's advance estimate was 3.2%, while the second estimate was 3.1%. The third estimate was 3.1%.
- U.S. GDP increased at an annualized rate of 4.3% between the third and fourth quarters of 2020, according to the third estimate from the BEA.
- This comes after the second-quarter contraction of 31.4%, which was the worst in U.S. history.
- The primary factors in the fourth-quarter increase were the increase in COVID-19 cases and new business restrictions and closures.