Companies quickly shifted resources in the second half of 2020, even as COVID-19 spread, increasing production of nondurable goods by 3% during the third quarter of 2020 compared with the first quarter of 2019, according to a Penn Wharton Budget Model analysis.
Consumption of durable goods rose 18% during the third quarter compared with the first quarter of 2019, pushing up durable goods production during the period close to the level during the first quarter of 2019, according to the study released on Feb. 3.
"As the economy reallocated resources in response to the pandemic, many sectors saw production and consumption near capacity," the study said.
U.S. gross domestic product (GDP) will likely recover to its pre-pandemic level by the middle of this year, according to the Congressional Budget Office (CBO), spurred in part by federal aid to businesses and households.
The $900 billion recovery legislation approved by Congress in December will probably boost GDP by 1.5% in 2021 and 2022, with most of the impact occurring this year, according to CBO. Annual GDP growth will probably average 2.6% from 2021 through 2025, the CBO said.
President Biden has proposed an additional rescue package totaling $1.9 trillion, roughly three times bigger than a $618 billion plan released by Senate Republicans on Feb. 1.
Biden administration relief payments would achieve "only small stimulative effects, with 73% of the stimulus going directly into household savings," according to the Penn Wharton Budget Model analysis.
"Government spending in 2020 did not significantly increase consumption or investment relative to 2019 and instead accrued mostly to U.S. household savings, which rose from $1.2 trillion in 2019 to $4.8 trillion" in the second quarter of 2020, the study said.
The shock from the coronavirus last year varied across the economy, according to the analysis. "From aggregate consumption and production data in relation to the relief payments provided in 2020, we find that the COVID-19 economic shock had very uneven impacts on the economy," the study said.
Lockdowns and reduced in-person contact pushed down spending on services by 13.6% and 6.36% in the second and third quarters of 2020, respectively, compared with the first quarter of 2019, according to the study.
Meanwhile, compared with the first quarter of 2019, consumption of nondurable goods fell just 0.51 percent in the second quarter and rose 6.47% during the third quarter, the study said.
Consumption of durable goods did not decline in 2020, the report said. "It was most notably driven by an increase in demand for recreational goods and vehicles as people sought entertainment which was less restricted by stay-at-home orders and lockdowns."