The term GDP is used when assessing the economic state of the market at the global level or in an individual state. The concept appeared in 1934, and it was proposed to use the American economist Simon Smith. The value of GDP is reflected in national or foreign currency, depending on the purpose for which it is determined. Nominal GDP is calculated and determined based on the prices of the current year. It takes into account changes in the cost of each product/service and real production (actually manufactured products, work performed). The nominal value is easier to obtain, but it does not allow for comparative analysis between countries. It is also difficult to compare periods since the real value of GDP is affected by inflation, which varies significantly in value from year to year.
The value of real GDP turns out to be more informative. This meaning gives an accurate definition of the period of the economy in the state – there is a crisis recession or scientific and technological growth is preserved (Watanabe et al. 227). Real GDP does not depend on exchange rate fluctuations of the national currency against the US dollar and other foreign currencies.
US GDP in the second quarter of 2020 contracted by a record 32.9% in annual terms. The decline in GDP is a consequence of the COVID-19 pandemic, as the isolation regime was partially maintained in March and April (Bea.gov). US GDP in the third quarter of 2020, according to the third, final estimate, grew by a record 33.4% year-over-year. The upward revision primarily reflects stronger growth in consumer spending and capital non-residential investment.
The year 2020 for the US economy passed under the significant influence of the pandemic; at least in the first half of 2021, this dependence will continue. Another exacerbation of the epidemiological situation at the end of the year slowed down the American economy, but the process of renewed activity continues. New waves of the coronavirus epidemic and the absence of a new fiscal stimulus package remain the main risks for worsening the situation. At the same time, the absence of a large-scale lockdown and the prospects for an early vaccination leave hope for an improvement in the situation.
The main component of GDP, consumption, grew by 40.6% in Q3 2020. Consumption was supported by fiscal stimuli and the resumption of activity after the lockdown, which was especially noticeable at the beginning of the third quarter after which growth slowed down (Lea 3). The most significant growth was expected in the consumption of goods. Spending on services also increased but remains the most affected component of consumption, which is logical since restrictions and fears associated with the epidemic reduce consumer activity in the service sector. At the same time, consumer income declined by more than 10% overall due to the end of the financial assistance program, which will further slow down consumption if there are no new support measures.
In general, the GDP of the USA will only rise during the year since the world is slowly recovering and getting better after the pandemic lockdowns. The consumption of the goods will also grow, which will positively influence the GDP. However, the improvement is going to be slower compared to the years before the pandemic since a lot of businesses experienced financial stress, which decreases the consumption-ability of the population.
Works Cited
“Gross Domestic Product, First Quarter 2021 (Second Estimate) Corporate Profits, First Quarter 2021 (Preliminary Estimate)”. Bea.gov, 2021, Web.
Lea, Ruth. “GDP falls nearly 10% in 2020 but, after first quarter weakness, should recover well in 2021.” Arbuthnot Banking Group 15 (2021): 1-11.
Watanabe, Chihiro, et al. “Measuring GDP in the digital economy: Increasing dependence on uncaptured GDP.” Technological Forecasting and Social Change 137 (2018): 226-240.