WASHINGTON, United States (AP) — The US economy grew at a solid 6.4 per cent rate in the first three months of this year, setting the stage for what economists are forecasting could be the strongest year for the economy in possibly seven decades.
The Commerce Department said yesterday that growth in the gross domestic product, the country’s total output of goods and services, was unchanged from two previous estimates. The gain represented an acceleration from growth at a 4.3 per cent rate in the fourth quarter.
Economists believe gross domestic product (GDP) growth has accelerated even more in the current April-June quarter as increased vaccinations have allowed for more businesses to reopen and encouraged consumers to get out and spend. The spending has been aided by the nearly US$3 trillion in support the Government has approved since December.
“This summer will be hot for the US economy,” predicted Lydia Boussour, lead US economist for Oxford Economics.” As the health situation continues to improve, consumers sitting on piles of savings will give into the urge to splurge on services and experiences they felt deprived of during the pandemic.”
Boussour forecast that GDP growth in the current April-June quarter will surge to an annual rate of 12 per cent, and growth for the entire year will come in at 7.5 per cent. That would be the best annual performance since 1951.
Even economists, whose forecasts for 2021 growth range from 6 per cent to 7 per cent, believe growth this year will be the best since a 7.2 per cent gain in 1984 when the economy was still recovering from a deep recession triggered by the Federal Reserve to halt a bout of inflation.
Economists believe growth in the current quarter will be enough to push GDP output above the previous peak set in the fourth quarter of 2019 before the pandemic struck, ending the longest economic expansion in US history.
Yesterday’s GDP report was the Government’s third and final look at first-quarter GDP.
Consumer spending, which accounts for more than two-thirds of economic activity, grew at a sizzling annual rate of 11.4 per cent in first three months of the year, up slightly from the 11.3 per cent growth estimate made a month ago. Consumers benefited from a round of US$1,400 individual payments that were included in the US$1.9-trillion support package Congress passed in March.
The first-quarter spending gain reflected increases in goods purchases, led by auto sales, and gains in spending on services, led by food services and travel accommodations — two areas that have benefited from the reopening of the economy as vaccinations have increased.
Business investment grew at a strong 11.7 per cent rate, better than the previous estimate of 10.8 per cent growth, while Government spending increased at a 5.7 per cent rate, slightly below last month’s estimate of a 5.8 per cent gain.
The trade deficit grew in the first quarter, subtracting 1.5 percentage points from growth, as a recovering US economy attracted rising imports while US exporters struggled with weaker overseas demand.
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