US economic growth accelerated in the first quarter as the government gave money to mostly lower-income households, fueling consumer spending and setting the course for what is expected to be the strongest performance this year in nearly four decades.
The government largesse also extended to businesses, especially in the high-contact services industry.
The massive fiscal stimulus and easing anxiety over the COVID-19 pandemic, with all adult Americans now eligible for vaccination against the virus, have resulted in a faster economic rebound in the US compared with its global rivals.
The second-fastest GDP growth since the third quarter of 2003, reported on Thursday by the US Department of Commerce, left output just 0.9 percent shy of its level at the end of 2019.
Economists expect a full recovery from the pandemic recession, which started in February last year, in late 2023.
“In early 2021, the economy was served a strong cocktail of improving health conditions and rapid vaccinations, along with a fizzy dose of fiscal stimulus and a steady flow of monetary policy support,” said Lydia Boussour, lead US economist at Oxford Economics in New York. “Looking ahead, we foresee the economy’s spring bloom turning into a summer boom.”
GDP increased at a 6.4 percent annualized rate last quarter, the government said in its advance estimate for the first three months of the year.
That followed a 4.3 percent growth rate in the fourth quarter. It was the biggest first-quarter increase in growth since 1984.
Economists polled by Reuters had forecast GDP growth would increase at a 6.1 percent pace in the January-to-March period.
Income at the disposal of households before accounting for inflation surged by US$2.36 trillion after decreasing US$402.1 billion in the fourth quarter.
As a result, consumer spending jumped at a 10.7 percent rate, boosted by purchases of motor vehicles, furniture, recreational goods and electronics.
People also dined out, stayed at hotels and gambled.
Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 2.3 percent pace in the fourth quarter. Some of the stimulus money was stashed away, with savings ballooning to US$4.12 trillion from US$2.25 trillion in the fourth quarter.
Economists estimate that households have accumulated at least US$2 trillion in excess savings during the pandemic.
The government has provided nearly US$6 trillion in COVID-19 relief over the past year. Robust demand in the first quarter pushed against supply constraints, leading businesses to draw down inventories, limiting the rise in GDP growth.
Excluding inventories, government and trade, the economy grew at a 10.6 percent rate last quarter.
The rapidly accelerating growth could revive fears about the economy overheating.
The US Federal Reserve on Wednesday acknowledged the burgeoning domestic activity, but the central bank gave no sign that it was ready to reduce its extraordinary support for the recovery.
Inflation has accelerated, but many economists, including Fed officials, expect it will be transitory, as the labor market remains 8.4 million jobs below its peak in February last year.
The labor market is gradually recovering.
In a separate report on Thursday, the US Department of Labor said that initial claims for state unemployment benefits fell 13,000 to a seasonally adjusted 553,000 during the week ended on Saturday last week.
While claims have dropped from a record 6.149 million in early April last year, they are above the range of 200,000 to 250,000 that is viewed as consistent with a healthy labor market.
There were 16.6 million people receiving unemployment benefits in the first week of last month.
“We’re still probably a couple years away from pre-pandemic employment levels, but based on the powerful economic momentum built up in the first quarter, we should return close to a fully functioning economy in the second quarter,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.
Economists forecast growth this year could top 7 percent, which would be the fastest since 1984. The economy contracted 3.5 percent last year, the worst performance in 74 years.
Cairo’s new monorail slices across the city skyline, running above the familiar chaos of blaring horns and aging buses’ exhaust fumes that mark rush hour below. The US$4.5 billion monorail, opened this month, is among Egypt’s most prominent new transport projects, part of a debt-funded infrastructure drive criticized for sapping state finances while bringing limited benefits to most of the country’s 109 million people. “It feels like you’re in a different country,” said Ramy Sayed, a restaurant manager, aboard a driverless Innovia 300 train. “No noise, no traffic, we’re not used to this.” The eastern line runs 56km from the bustling middle-class
Taiwanese firms have increased investment in the Philippines in recent years as Manila’s ties with Washington deepen and global supply chains continue to shift away from China, an expert at the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The Philippines had not been among Taiwanese investors’ top choices in Southeast Asia, CIER Taiwan ASEAN Studies Center director Kristy Hsu (徐遵慈) said at a seminar in Taipei. However, Taiwan’s investment in the country has grown significantly since the COVID-19 pandemic, reaching US $257 million last year, a high in recent years, she said. Although Taiwan’s total investment in the Philippines still lags
Intel Corp regards Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) as a longstanding partner, as the US chipmaker would continue outsourcing production of advanced chips to TSMC, Intel chief executive officer Lip-Bu Tan (陳立武) said yesterday. “I don’t look at people as competitors. I look at the collaboration... Nvidia is also, you know, a good friend,” Tan told a news conference following his keynote speech at the Computex trade show in Taipei. “It’s a very trusted partnership for us... We are a big, top customer for them, and we’re going to continue doing that,” he said, referring to TSMC, the world’s largest foundry
Artificial intelligence (AI) agents would supplant smartphones as the center of people’s digital lives, fundamentally reshaping personal devices and driving a major computing upgrade cycle, Qualcomm Inc CEO Cristiano Amon said yesterday. In his keynote speech for this year’s Computex trade show in Taipei, Amon said that the rise of "agentic AI" — AI systems capable of reasoning, planning and carrying out tasks autonomously — would transform how people interact with technology across phones, PCs, vehicles and wearable devices. Describing the technology as the next major evolution in computing, Amon said that "2026 is the year of agents.” For decades, smartphones have sat
RSS