Economy Grew at 4% in Q4

Real gross domestic product increased at an annual rate of 4.0% in the fourth quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. (BEA)

  • MISSED: Economists had projected growth of 4.3% in Q4
  • TOTAL YEAR: Despite a second-half rebound, Real GDP decreased 3.5% in 2020
  • POSITIVE READJUST: The real GDP adjusted upward to 33.4% for Q3

Personal income was up 6% for the year, but that didn’t help consumer spending which did grow 2.5% in Q4 but was down 3.9% in 2020.

  • PETERSON INSTITUTE points out that this increase in income the largest since 1984 and was “entirely driven by increases in government benefits, without which income would have fallen 0.9 percent” (PIIE)

The PCE Price Index, known for capturing inflation, was at 1.2% for 2020 down from 1.5% in 2019.

GOOD NEWS FOR HOUSING: Housing construction and renovation rose 33.5% after a 63% gain in the third quarter.

THE FUTURE: On Tuesday, The International Monetary Fund raised its forecast for global economic growth in 2021. They now expect global growth of 5.5% and 5.1% growth in the U.S. (Reuters)