Today, the government is expected to report the fastest quarterly growth on record after businesses reopened after pandemic shutdowns and consumers proved resilient.
But the headline number, like the record contraction preceding it, obscures key parts of the story.
Data due today is forecast to show U.S. gross domestic product surged an annualized 32% in the third quarter, almost double the previous high. That figure will reflect activity switching back on across the country after covid-19 fears and government stay-at-home orders ground the economy to a halt in April.
"The strength of this figure is an optical illusion," Nancy Vanden Houten, an economist at Oxford Economics, wrote in a research note. "Growth has since slowed, and we expect markedly weaker activity" in the October-December quarter and beyond.
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The number fails to capture the fact that the pace of growth has moderated significantly since early in the recovery. Overall economic activity will likely remain below its pre-pandemic level for some time, even though some sectors such as retail sales and housing have made comebacks.
The economy currently faces tough challenges including a fresh surge in new covid-19 cases, rising long-term unemployment and a lack of additional government stimulus.
The report comes out five days before Election Day. While it's unclear how much it will help President Donald Trump, especially since more than 69 million Americans have already voted, there's a good chance Trump and his surrogates will highlight the GDP number as evidence of the president's economic stewardship.
Bloomberg Economics estimates the outsize rebound will still leave the U.S. economy's size almost 4% below its pre-crisis peak.
Michael Gapen, chief U.S. economist at Barclays Plc, doesn't expect a full recovery in the level of GDP until the first quarter of 2022.
The headline number also overstates the actual change in economic output because it represents an annualized rate -- or what the quarterly change would be if it lasted a full year.
A 32% annualized growth rate would actually be derived from a quarterly increase of about 7.2%. That compares with a 9% decline in the second quarter -- or an annualized contraction of 31.4%.
Before the crisis, the economy was usually growing by a few tenths of a percentage point each quarter, resulting in an annualized pace typically ranging from 2% to 3%.
CONSUMER SPENDING
A resurgence in consumer spending is driving the increase. Personal consumption is estimated to jump an annualized 38.9% after plummeting 33.2% in the previous period.
Consumer spending accounts for about two-thirds of gross domestic product and is typically driven by spending on services -- like health care, travel and dining out.
While health risks from covid-19 have severely curbed such spending, Americans have used some of their dollars elsewhere.
"The unique feature of the rebound, in my opinion, has been the compositional shift -- or how quickly households substituted away from services spending toward goods spending," Gapen said.
Purchases of cars, furniture, and sporting goods as well as spending at grocery stores and online retailers like Amazon.com Inc. are above pre-pandemic levels. But spending on overall services remains depressed.
Other categories are also poised to support growth, including a booming housing market and a rebound in business investment. Meanwhile, a wider trade deficit will weigh on the headline figure. Government spending may be a wild card, with economists' estimates varying.
The reported level of gross domestic product is a three-month average of economic activity, adjusted for seasonal fluctuations and annualized. That is then compared with the previous quarter's three-month average to get the growth rate.
NUMBERS MASK VOLATILITY
In fact, the third-quarter growth number will largely reflect the widespread business reopenings that began back in April and May, rather than the more-modest economic gains seen in September.
"In this environment, the quarterly numbers in a way mask a lot of movements that are happening on a monthly and even on a weekly basis given how quickly the economy changed in the face of the covid shock," said Michelle Meyer, head of U.S. economics at Bank of America Corp.
The beginning of the quarter matters most, "so, because the second quarter showed a recovery throughout the quarter, the third quarter started on a healthier footing," Meyer said.
Economic growth is projected to slow sharply, to 4% in the October-December period, according to a Bloomberg survey of economists in early October.
Americans are showing growing concern about the economy. Consumer confidence slipped in October after having risen sharply in September. Consumers' outlook for the economy over the next six months fell particularly hard, according to the Conference Board, a business research group.
"There is little to suggest that consumers foresee the economy gaining momentum in the final months of 2020, especially with covid-19 cases on the rise and unemployment still high," said Lynn Franco, the board's senior director of economic indicators.
Meantime, lawmakers have yet to reach an agreement on a new large stimulus package after three months of negotiations. And colder weather and a recent surge in covid-19 cases threaten to weigh on growth further.
Information for this article was contributed by Reade Pickert of Bloomberg News and by Christopher Rugaber of The Associated Press.