US economic growth shatters record at 33.1%, but fails to snap coronavirus recession

The U.S. economy grew at a record-shattering pace in the third quarter as businesses reopened from the coronavirus shutdown, but the nation remains in a deep hole from the COVID-induced recession.

Gross domestic product, the broadest measure of goods and services produced across the economy, surged by 33.1% on an annualized basis in the three-month period from July through September, the Commerce Department said in its first reading of the data Thursday. The previous post-World War II record was a 16.7% increase in 1950.

Refinitiv economists expected the report to show the economy had expanded by 31%.

But the headline figure obscures the full picture: The economy contracted at an annual revised rate of 31.4% in the previous quarter, the sharpest decline in modern American history, and remained 3.5% smaller than compared to the end of 2019.

"The economy in the third quarter will still be far below what it was pre-COVID, so far below that the depth of the recession even after that record growth will still be as a deep as a very deep recession, like the 2008 recession," Justin Wolfers, a University of Michigan economist, told FOX Business.

The Commerce Department calculates the GDP on a quarter-over-quarter basis as if that level of growth were sustained for a full year; in times of huge swings up or down, it can exaggerate both the decline in growth and the subsequent rebound. Because third-quarter growth will be measured against second-quarter growth -- a historically low baseline --  any bounceback at all would generate huge growth.

"Even though this quarter’s GDP came in relatively strong, we have to keep in mind that this grade comes on a big curve – this is really a benchmark against the drastic hole we started to climb out of in [the second quarter]," said Steve Rick, chief economist at CUNA Mutual Group.