The economy grew at a 4.1 percent pace in the final three months of 2020, slightly faster than first estimated, ending a year in which the overall economy, ravaged by a global pandemic, shrank more than in any year in the past seven decades.
The influx of new government stimulus efforts and accelerated vaccine distribution could lift growth in the current quarter, ending in March, to 5 percent or even higher, economists believe.
The 4.1 percent gain in the gross domestic product — the broadest measure of economic health — is a slight upward revision from 4 percent growth in the first estimate released a month ago, the Commerce Department reported Thursday.
The revision does alter the nation's annual GDP which shrank 3.5 percent, the largest decline since 1946 when the U.S. demobilized after World War II.
As bad as 2020 was, it's set the nation up for what economists believe will be a very strong rebound. Many project a growth rate of 5 percent or more in the current quarter or more, with 9 percent growth the headline in some forecasts.
For all of 2021, economists are forecasting the GDP could grow by 6 percent. That would be the fastest annual GDP growth since the economy expanded 7.2 percent in 1984 when Ronald Reagan was president.
Fueling optimism about an economic comeback is a sharp decline in new COVID-19 infections, and recent surging sales in the beleaguered retail sector.
“You have massive government stimulus, low interest rates from the Fed and the vaccine supply is growing,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University in Los Angeles. “The economy is beginning to fire on all cylinders.”
The upward revision to the nation's quarterly GDP reflected stronger housing construction, a bigger increase in business inventories, and a smaller decline in state and government spending than first estimated a month ago.
These gains offset a slightly slower increase in consumer spending, which accounts for two-thirds of economic activity. The new report showed consumer spending growing at a 2.4 percent rate, slightly lower than the 2.5 percent gain initially estimated.
Housing construction, the star performer for the economy last year, grew at a 35.8 percent rate in the fourth quarter following a 63 percent surge in the third quarter.