Record surge for US economy in third quarter

After the worst downturn on record, the US economy posted its strongest growth on record in the third quarter just days away from the US presidential election.

Commerce Department data showed GDP rose by an annualised 33.1pc between July to September, following a 31.4pc decline in the second quarter. The jump was twice as high as the next best quarter back in 1947.

However, economists said the headline figure masked signs of trouble because the recovery was driven by consumer spending supported by $3 trillion (£2.3 trillion) of government aid, much of which has now ended.

"The strong GDP performance gives a false impression of the economy's true health,” said Gregory Daco of Oxford Economics. “Without further fiscal aid until 2021, a poorly managed health situation and election uncertainty could make for a long winter.”

To return the economy to its pre-pandemic state at the end of last year would take a 53pc rise in GDP, or a 64pc surge to return it to where it would have been had there been no pandemic, according to David Wilcox, former director of the Federal Reserve's domestic economics division.

GDP remains 3.5pc lower than it was in the last quarter of last year.

Mr Wilcox added that while the data would be “ballyhooed as a tremendous accomplishment”, the pace of recovery had slowed dramatically, with potentially “little or no growth in activity in September.”

Paul Ashworth of Capital Economics said he expected GDP to rise just 4.5pc in the fourth quarter.

Separate data from the Labor Department showed the weekly tally of new applications for jobless benefits fell 40,000 to 751,000 in the week to Oct 24, against a backdrop of increasingly urgent calls from the Federal Reserve and others for a new round of federal support aimed at individuals and state and local governments to prevent another wave of job losses and business closures.

Capital Economics said employment in the federal government employment was likely to have fallen this month as field operations for the 2020 census wound down, with 99,000 temporary workers employed during the survey week in October, down from 247,000 in September.