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U.S. economic growth received a boost during the first three months of 2021 thanks to a massive fiscal stimulus that fueled consumer spending, as well as looser blockade restrictions, which brought production closer to pre-pandemic levels.
Gross domestic product advanced 6.4% on an annualized basis during the first quarter, the Commerce Department said Thursday. This exceeded economists’ expectations of 6.1% growth, according to a Refinitiv survey, and marked the fastest growth in the first quarter since 1984.
Economic output advanced 1.6 percent compared to the previous quarter, according to the measure used by other major economies. Real GDP was only 1% of its pre-pandemic level.
Speaking to lawmakers Wednesday night, the eve of his 100th day in office, Joe Biden greeted the country’s revival of pandemic struggles, declaring that America was “ready for takeoff.”
“It simply came to our notice then. Dreaming again. Discovering again. Lead the world again. We have shown each other and in the world: in America there are no renunciations “, he said.
Despite the rapid rebound in the world’s largest economy, Biden called for lawmakers to approve its extensive spending agenda, which is designed to allocate trillions of additional government funds to investment over the next decade to correct deficiencies in public goods.
After enacting a $ 1.9 million fiscal stimulus plan in March, Biden has focused its focus on gaining support for $ 2.3 million in infrastructure spending bill called a “blue-collar plan for America” and a $ 1.8 million expansion of the social safety net. “We can’t stop now: we are in competition with China and other countries to win the 21st century.”
Biden was heading to Georgia on Thursday afternoon to meet former President Jimmy Carter and hold an event to promote his economic packages, while trying to increase public support for the legislation.
The president wants to pay for the next phases of his economic program with higher taxes on businesses and the rich, which have provoked a backlash from Wall Street and American businesses, opposition from Republicans and even some caution. among Democrats.
U.S. economic growth has accelerated as more Americans are vaccinated against coronavirus and states and cities have begun to relax pandemic restrictions. The U.S. has administered 234.6 million doses and 98 million Americans are fully vaccinated, representing 29.5% of the total population.
Consumers spent generously on goods as the economy has reopened, based on stimulus controls and their stack of savings. Personal consumption expenditure grew at an annualized rate of 10.7%. However, Ian Lyngen, head of U.S.-type strategy at BMO Capital Markets, noted that spending on services changed little.
“This leaves open the possibility of a strong second quarter, as the reopening will lead to the consumption of the service sector, although it also reiterates the concern that simply unlocking the doors and turning on the lights will not be enough to get consumers to re-engage in trade personally, ”he said.
Following the GDP report, the pressure was briefly reduced on the Treasuries with a longer date, and the 10-year benchmark bond fell to 1.65%. Subsequently, it increased to 1.68%. US stocks rose, with the S&P 500 rising just 0.2 percent in midday trading.
The Federal Reserve on Wednesday recognized progress in the economic recovery, but argued that its future path “would depend significantly on the course of the virus.” Fed Chairman Jay Powell said that while “the recovery has progressed faster than generally expected, it remains uneven and far from complete.”
In fact, despite the improvement, the labor market is a long way from recovering all the jobs lost since the start of the pandemic. Powell noted that Wednesday a month of stellar employment growth “was not enough.”
“The Fed will clearly recognize this as an important factor in judging the global recovery,” said Padhraic Garvey, global head of debt and ING rate strategy. “But fundamentally, it’s a different kind of Fed, in the sense that they focus on the most vulnerable households affected by Covid, rather than the median.”
A separate report from the labor department showed Thursday that 553,000 Americans applied for new unemployment benefits last week, the lowest level since the pandemic began, but that it has still risen historically. About 16.6 million Americans continue to seek unemployment benefits more than a year after the pandemic began.
The Fed, which noted it was in no hurry to eliminate its ultra-light monetary policy, has projected GDP growth of 6.5% and an unemployment rate of 4.5% this year. Growth is expected to moderate to 3.3% in 2022.
Despite the strong GDP report, Patrick Leary, chief market strategist and senior operator of Incapital, expressed concern about the growth trajectory of the economy once the effects of the easing stimulus package further diminished. recent Covid.
“I wonder how much the economy can grow without the help of the stimulus, but maybe that doesn’t matter in the short term as the administration plans another round of spending to stimulate the economy.”
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