WASHINGTON, Nov. 25 (Xinhua) -- U.S. economic activity in the third quarter grew at an annual rate of 33.1 percent in a second estimate, after a sharp contraction in the previous quarter, the Commerce Department reported on Wednesday.
Despite the seemingly fast rebound, the U.S. economy in the third quarter was down by 2.9 percent compared with that a year ago, according to a report released by the department's Bureau of Economic Analysis (BEA).
The economy is still about 3.5 percent smaller than it was at the end of the last year, before it was ravaged by the COVID-19 pandemic.
The rebound in the third quarter came after the economy plunged at a revised annual rate of 31.4 percent in the second quarter amid mounting COVID-19 fallout, which has been the largest decline since the U.S. government began keeping records in 1947.
The initial jump in economic activity following lockdowns in May and June "boosted the level of spending going into the third quarter and buoyed third quarter averages," Diane Swonk, chief economist at Grant Thornton, a major accounting firm, wrote in a blog Wednesday.
Swonk, however, noted that consumer spending actually slowed during the summer as the 600-U.S.-dollar per week supplements, unemployment benefits and stimulus checks lapsed.
"Recovery is showing signs of weakening as we move from summer into fall," she said.
The growth in real gross domestic product in the third quarter reflected increases in personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, and residential fixed investment that were partly offset by decreases in federal government spending, as well as state and local government spending, the BEA report showed.
With the second estimate, upward revisions to nonresidential fixed investment, residential investment, and exports were offset by downward revisions to state and local government spending, private inventory investment, and PCE, according to the report.
Also on Wednesday, the Labor Department reported that the number of initial jobless claims in the United States rose for the second week in a row to reach 778,000 last week, signaling the recent COVID-19 surge has begun to weigh on the labor market recovery.
Nearly 1.2 million new cases were reported in the last seven days, according to the data updated by the U.S. Centers for Disease Control and Prevention on Wednesday. Total cases already surpassed 12 million.
In response to spikes in infections, governors across the country have recently reinstated restrictive measures to curb the spread of the virus, casting shadow over economic recovery.
"We expect the loss in momentum to show up as a sharp slowdown in growth for the fourth quarter, then a contraction in the first quarter of 2021," Swonk said.
Swonk also noted that much depends upon the surge in cases following Thanksgiving. "Sadly, it looks like too many opted to travel instead of staying home, which could exacerbate the pace of infections as we move into December," she said.
Despite recent news on vaccine development, Federal Reserve Chairman Jerome Powell cautioned last week that significant downside risks for the economy remain, as widespread vaccination is still months away even in the best case.
Powell renewed his call for Congress to roll out more fiscal support, saying that fiscal policy, which includes taxing and spending, can provide "direct, targeted income support" for groups that really need it.
The extra 600-dollar weekly unemployment benefits from the federal government, as well as some other relief measures approved in late March, expired at the end of July, but Congress and the White House remain deadlocked over the next round of fiscal support.
"The situation will no doubt get worse if Congress fails to act to provide additional aid before year-end," Swonk said.