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Tuesday, Aug. 24, 2021

Did US GDP make a full recovery from the COVID-19 recession by the end of the first quarter of 2021?


no

The Bureau of Economic Analysis reported an annualized rate of decline of real GDP (the value of goods and services accounting for price changes) of 31.4% in the second quarter of 2020, which represents what would happen over the course of a year if that decline persisted. However, change in GDP between just the first and second quarter was -9%. The quarterly change in GDP in the third quarter was a strong rebound of 7.5%, and the next two quarters saw real GDP grow by 1.1% and 1.6% (respectively). By the end of the first quarter in 2021 real GDP had still not fully recovered to pre-pandemic levels. While it may seem like 7.5% + 1.1% + 1.6% = 9.2%, which overcomes the effect of a -9% prior growth rate, this isn’t the case. To illustrate why, if you start with $100 and lose 50% of your money, you have $50. If you then make a 50% gain, you will have only $75.

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