The US economy showed signs of improvement in the third quarter of this year, with the Gross Domestic Product seeing a modest 4.9% increase according to the U.S. Bureau of Economic Analysis. This increase was better than analysts had expected and marked a significant improvement from the 3.5% contraction rate recorded in the second quarter.
The increase in GDP represents a modest rebound from the historic dive the US economy experienced in the second quarter due to the coronavirus pandemic. Despite the increase, GDP remains several percent below its pre-COVID levels, and the full economic recovery is still far from certain.
The U.S. economy has relied heavily on government stimulus throughout the coronavirus pandemic and many experts believe that this has been the main driver behind the third-quarter GDP increase. Government spending, including aid to states and local governments, unemployment insurance, and payments to individuals, have all been injected into the economy in an effort to help industries and individuals that have been hit hard by the crisis.
The service sector in particular was responsible for the majority of the increase as it saw a 7.8% growth, while the manufacturing sector experienced a 3.4% increase. This sector is particularly sensitive to the coronavirus due to the long supply chains and obstacles to production it relies on, and its performance in the third quarter was a sign that the stimulus money has been helping to ease its difficulties.
Although the increase in GDP was better than expected and certainly a positive sign in the fight against the economic contraction, it is still much smaller than the 19.7% increase recorded in the second quarter of 2020. This is a reminder that the US economy still has a long way to go before a full recovery is achieved.