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U.S. economy grows at record 33.1% annualized rate in Q3

U.S. GDP grew at a record 33.1% annualized rate in Q3. Yahoo Finance's Brian Cheung explains.

Video Transcript

ADAM SHAPIRO: The reading was good, showing growth of 33.1% on an annual basis. The pandemic obviously taking a huge bite out of the economy earlier this year. Brian Cheung is here now to break down these numbers and to help us understand what they truly mean, Brian.

BRIAN CHEUNG: Well, Adam, the Bureau of Economic Analysis this morning reporting that the US economy grew, as you mentioned, at a 33.1% annualized rate in the quarter. That covers June through September, the third quarter. That beat the estimates on the Street of 32%, so a slight upside surprise.

It's important to note, though, that this does not mean that the economy grew by 33% in that quarter. Instead, it means that the economy would grow by 33% if it sustained that pace over another three quarters. And as we know, Adam and Julie, with concerns over rising COVID cases and a lack of a vaccine, at least for right now, it's unlikely that that pace is going to be sustained for even another quarter or so.

But here's another way, a better way, to think about it perhaps. If you look at just the real GDP levels-- I believe we have a graphic for that. The rebound in the third quarter, it definitely helped the economy bounce back, but we're still quite far from where we were pre-pandemic. In fact, if you look at GDP in the third quarter, it's still 2.9% below where it was the same quarter of last year on a not-annualized basis, and that's the hole that we need to plug as we do continue to get through this recovery.

So yes, it was still quite the rebound, a lot of that led by housing, which actually surpassed pre-pandemic spend. Thank you, Federal Reserve, with low interest rates and low 30-year mortgage rates. But again, it does show that the GDP still does remain significantly below where we were before this pandemic started. So a lot of work to do in the quarters ahead.

JULIE HYMAN: Indeed. Brian Cheung, thank you so much for putting that into perspective. Appreciate it.