How the U.S. Economy Powered Through Q3

The U.S. economy was resilient in the third quarter, with sales and growth powering higher despite the persistent coronavirus pandemic, increased uncertainty about the future and Congress’ inability to pass another spending package to help struggling small businesses and unemployed workers.

Driving the news: Bank of America on Monday revised its third quarter growth forecast to 33%, up from 27%, and just below Goldman Sachs’ recently revised forecast for a 35% jump, up from 30%.

  • While both are well above the Wall Street average (consensus is for 25.9% growth, per FactSet), the two heavyweights’ lofty predictions highlight a theme of improved expectations.

What happened: Even with fewer businesses open and social distancing restrictions in place, Americans increased their spending significantly, especially on vehicles, furniture, home renovations, electronics and at big box retail stores.

  • August’s U.S. retail sales report showed a 2.6% increase from August 2019 and total sales for the June–August 2020 period were up 2.4% from the same period a year ago.
  • June and July’s increases were thanks largely to direct payments and enhanced unemployment benefits paid by the government, but even after they expired Americans kept spending.