The US economy shrank 3.5% in 2020 — the worst year since 1946

The Commerce Department said Thursday that the U.S. economy grew at an annual rate of 4% in the fourth quarter of 2020. That followed a third-quarter GDP growthe rate of 33.4%.

Image source: U.S. Bureau of Economic Analysis

But the positive quarterly news was not nearly enough to counter the disaster the country experienced in the first and second quarters of 2020, CNN Business reported.

What are the GDP numbers for 2020?

GDP decreased 3.5% in 2020 from the 2019 annual level, the Commerce Department said. The economy had grown 2.2% in 2019.

This is the first year-to-year GDP decline since 2009, when the economy contracted 2.5%, CNN said.

And it's the worst dip since 1946.

The fourth-quarter 4% growth rate would have been an exceedingly good number if not for the current economic crisis spurred on by the pandemic and various federal, state, and local government reactions to the coronavirus.

From the U.S. Bureau of Economic Analysis:

The increase in fourth quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States.

The 5% annualized decrease in the economy in the first quarter coupled with massive losses in the second quarter and impressive third-quarter gains made for a crazy year.

"GDP shrank a record 31.4% on an annualized basis between April and June following the initial pandemic lockdowns," CNN said. "In the following three months, it came screaming back at a record 33.4% annualized pace but that still wasn't nearly enough to make up for the damage already done."

And despite the positive third- and fourth-quarter numbers, CNN warned:

[T]here was still plenty to be concerned about: disposable incomes fell by 9.5% on an annualized basis in the fourth quarter of last year, while the personal savings rate remained elevated at 13.4%. For an economy driven by consumer spending, it's not a good sign if people are leaving their money in the bank. Overall, personal income also declined, mostly due to the decrease in benefits as the CARES Act relief programs were winding down. With more stimulus agreed to since then and yet more eyed by the Biden administration, this might reverse in the future.

Conditions might not change very much in the first quarter of 2021, economists said.

This story has been updated.