US Economy Suffers Biggest Fall Since 1946

Figures released from the US Bureau of Economic Analysis have indicated the US economy expanded at a rate of 4% over the final quarter of 2020. This was in line with market expectations and shows the US economy contracted by 3.5% year-on-year, its biggest fall since 1946.

The news comes following a shift in both consumer and business spending over Q4 2020. Against the backdrop of a declining job market, retail sales had its worst fourth quarter performance since the 2008 financial crisis – dropping an average of 0.73%.

In contrast, business spending began to gear up for the 2021 recovery with Nondefense Capital Goods (the Durable Goods category used as a proxy for business investment spending) rising 1.07% over the same quarter. After falling a total of 8.5% in February, March and April, business spending nearly doubled to 15.5% over the next eight months.

Elsewhere, the Federal Reserve left its monetary policy unchanged on Wednesday, with Fed Chairman Jerome Powell reiterating the importance of getting the coronavirus pandemic under control, stating this was the best growth policy currently available to the country.

Following the conclusion of its two-day meeting, the U.S. central bank also said it was maintaining its asset purchase program, which sees it buying at $120 billion of bonds a month.