The U.S. economy surged at an unprecedented 33.1% annualized rate in Q3/20 as the nation partially reopened following the COVID-19 pandemic-induced shutdowns of early 2020. However, due to the historic deep decline in Q2/20, the U.S. economy is expected to end the year down 3.5% from 2019.
Growth in Q3 was fueled by a resumption in consumer spending and business investment:
o Consumer spending surged by 40.6% (annualized) in Q3/20, contributing 25.2 percentage points to GDP growth.
o Business investment grew 21.8% (annualized), while equipment and software investment jumped 46.9% (annualized) in Q3/20, contributing 3.4 percentage points to GDP growth.
Among the range of COVID-19’s impacts on businesses are the continued struggles of the retail and travel industries. The service industry appears to be expanding after bottoming out in late spring. Leisure and hospitality continues to struggle, and even with a vaccine, prospects for the airline and hotel industries in 2021 are uncertain.
Despite the ongoing recovery, millions of households are struggling to meet basic needs and many small businesses are in survival mode, which will ultimately weigh on growth prospects in 2021. However, the second half of the year looks more promising as vaccines allow businesses to reopen and/or expand capacity. Overall, the economy is expected to grow 4.7% in 2021.
Although headline employment numbers look promising, a detailed look shows:
o The unemployment rate fell from 6.9% to 6.7% in November due to unemployed people leaving the labor force.
o If people who left the labor force were considered unemployed, the rate would be nearly 10%.
o Full labor market recovery would not occur until late 2022 at the current pace.
New business volume growth reported in ELFA’s Monthly Leasing and Finance Index declined 9% year over year in October as the industry struggles to reclaim it pre-pandemic level. Cumulative new business volume for the year is down 5.8% from a year ago.
The Q1/21 Equipment Leasing & Finance Industry Snapshot was prepared by Keybridge Research.
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