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GDP closes in on a full recovery

March 26, 2021

Graph depicting year over year changes in major GDP components

Source: Bureau of Economic Analysis

Real GDP was revised higher to show an annualized increase of 4.3 percent in the fourth quarter, as exports and inventories were both restated to the upside. GDP has now retraced more than three-quarters of its massive decline during the 2020 recession and is on track to hit a new all-time high by the middle of this year. This is slow by historical standards, but this owes of course to the unusual nature of this cycle. Note that personal consumption of goods and residential investment have already surpassed their pre-COVID levels while capex is down only modestly over the past year. As the pandemic fades and the economy more fully reopens, it is a safe bet that services spending will respond as other major GDP components already have and that the positive feedback loops that are already developing will intensify.

Claims plunge anew

Initial unemployment claims fell by 97,000 last week to 684,000, the lowest level of the cycle. Claims have been especially choppy lately owing to the path of the virus, the weather, and fraud (note the huge swings in Ohio in recent weeks), but the underlying trend still looks to be very much to the downside. These numbers, along with the recent manufacturing data, also strongly suggest that the recent softness in some of the monthly indicators (retail sales, housing starts, etc.) owes much more to special one-off factors than to a shift in the broader trajectory.

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Thanks to ramped-up Exxon production, what was the fastest growing economy in the world in 2020?

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Who replaced both Ben Bernanke and Janet Yellen in 2014 when he filled the former’s seat on the Fed’s Board of Governors and took the latter’s position as vice chair?


Stanley Fischer


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