The economy expanded faster than previously believed at the end of Donald Trump’s presidency.
In the fourth quarter of 2020, real gross domestic product rose at a higher rate of 4.3 percent than previously estimated (4.1 percent).
The updated GDP figure explains why so much data for the first half of 2020 exceeded expectations. The economy was already hotter than we had expected. President Trump gave his Democratic critics a stronger-than-expected economy.
The “third” GDP estimate released on Thursday, March 25, is based on more complete source data than the “second” estimate released last month. According to the Bureau of Economic Analysis, the upward revision was largely due to a rise in private inventory investment, which was partially offset by a decline in nonresidential fixed investment.
Exports, nonresidential fixed investment, personal consumption expenditures, residential fixed investment, and private inventory investment all contributed to GDP growth, according to the government.
The increase in exports mainly reflected an increase in exports, nonresidential fixed investment, personal consumption expenditures, residential fixed investment, and private inventory investment. The rise in business spending was due to an increase in equipment purchases. A rise in services more than offset the increase in consumer spending led by health care. State and local governments, as well as the federal government spent less.
Imports rose in the fourth quarter, which is a subtraction in the GDP calculation.
Consumption spending was revised down a tenth of a percent to 2.3 percent, down from 2.4 percent previously. Inflation was lower than anticipated, with the personal consumption price index increasing just 1.5 percent, down from 1.6 percent previously estimated. Inflation in the core PCE, which excludes fuel and food, was just 1.3 percent.
In the fourth quarter, current dollar GDP rose by 6.3 percent on an annual basis, or $324.4 billion, to $21.49 trillion. GDP rose by 38.3 percent, or $1.65 trillion, in the third quarter.