Economy, and it shows a mixed outlook overall. The nation's GDP rose by an impressive 33.1% during the third quarter of 2020, but the housing market is still struggling to recover after months of disruption caused by the pandemic.
The GDP growth figure has been praised as a major step forward in the country’s economic recovery. However, this increase was primarily driven by consumer spending on services - such as recreation, food, and transportation - which was largely made possible by government stimulus measures. Meanwhile, investment in goods, which is considered a key indicator of economic health, fell at a rapid rate over the same period.
These figures illustrate how consumption-driven growth is only partially offsetting the ongoing economic impact of the coronavirus pandemic. Other sectors of the economy are still largely stagnant and have yet to show improvement, most notably the housing market. Home sales declined 4.3% in September and are 18.2% lower than they were before the pandemic began.
This dip in home sales is largely attributed to supply constraints caused by a lack of houses on the market, with the number of homes for sale dropping 22.5% since March 2020. As well, mortgage rates have risen for six straight weeks, further discouraging potential buyers. It appears that the housing market could take some time to make a full recovery.
Despite the decreasing availability of housing, the average price of existing homes actually increased 8.5% in September, driven by a shortage of cheaper properties. This suggests that higher-end homes are selling more frequently and contributing to the rising prices seen across the sector.
Overall, while the GDP increase in Q3 is a positive sign for the economy, it is not enough to make up for the continued weakness in other areas. The housing market remains a major obstacle to growth, and it looks like the situation will not improve anytime soon. If the continued pandemic-related disruptions can be managed and people’s confidence begins to return, then the domestic economy could experience a more sustained recovery in the future.
Recent data provides a nuanced view of the current US economy, suggesting a combination of both positive and negative aspects. Positively, the GDP increased by 33.1% in the third quarter of 2020, a figure attributed to government stimulus measures that allowed an increase in consumer spending on services. Also, the availability of mortgages is still high, meaning that those who can afford it have the opportunity to invest.
On the other hand, investment in goods decreased over the same period, illustrating that some sectors are still stagnant and have yet to show improvement. The housing market, in particular, has experienced a sharp decline, with home sales falling 4.3% and 18.2% lower than before the pandemic began. Supply constraints have caused the number of properties on the market to drop 22.5%, while mortgage rates have risen for six straight weeks, further discouraging potential buyers. Nevertheless, the average price of existing homes has increased 8.5% due to a greater demand for higher-end properties.
Overall, the US economy is facing difficulties in certain areas that will need longer-term solutions to address. The government stimulus measures that boosted consumer spending on services have provided a short-term boost to the GDP, but for more sustained growth, the housing market needs to make a full recovery. If the pandemic-related disruptions can be managed and there is a renewed sense of confidence among the people, then a more sustained economic recovery may be achievable in the near future.
This article was contributed on Aug 07, 2023
