U.S. economic growth received a boost in the first three months of 2021 thanks to a massive fiscal stimulus that fueled consumer spending, as well as an easing of foreclosure restrictions, bringing production closer to levels of before the pandemic.
Gross domestic product rose 6.4% on an annualized basis in the first quarter, the commerce department said Thursday. That exceeded economists’ expectations for 6.1% growth, according to a Refinitiv survey, and marked the fastest first quarter growth since 1984.
Economic output grew 1.6 percent from the previous quarter, according to the measure used by other major economies. Real GDP was only 1 percent below its pre-pandemic level.
Speaking to lawmakers Wednesday night on the eve of his 100th day in office, Joe Biden greeted the country’s rebirth from pandemic struggles, declaring America “ready to take off.”
“We are working again. Dreaming again. Discover again. Rule the world again. We have shown ourselves to each other and to the world: there is no stopping in America, ”he said.
Despite the rapid rebound in the world’s largest economy, Biden made a strong appeal to lawmakers to approve his sweeping spending program, which is designed to spend billions of dollars in additional government funds on investments over the course of the next decade to correct deficiencies in public goods.
After promulgating a $ 1.9 billion fiscal stimulus package in March, Biden focused on securing support for a $ 2.3 billion infrastructure spending bill he called a “blue collar plan for America” and a $ 1.8 billion expansion social safety net. “We can’t stop now – we are competing with China and other countries to win the 21st century.”
Biden was traveling to Georgia Thursday afternoon to meet with former President Jimmy Carter and host an event to promote his economic packages, as he tries to increase public support for the legislation.
The president wants to pay for the next steps in his economic program with higher taxes on businesses and the wealthy, which have sparked a backlash from Wall Street and corporate America, opposition from Republicans and even some mistrust among politicians. fellow Democrats.
U.S. economic growth has accelerated as more Americans are vaccinated against the coronavirus and states and cities begin to ease pandemic restrictions. The United States has administered 234.6 million doses and 98 million Americans are fully immunized, representing 29.5% of the total population.
Consumers lavishly spent on goods as the economy reopened, relying on stimulus checks as well as their savings stack. Personal consumption spending grew at an annualized rate of 10.7%. However, Ian Lyngen, chief US rate strategy at BMO Capital Markets, noted that spending on services had changed little.
“This leaves the possibility of a strong second quarter, as the reopening will boost consumption in the service sector, while also reiterating concerns that simply unlocking the doors and turning on the lights will not be enough to entice consumers to check out. re-engage in person. trade, ”he said.
Pressure eased briefly on longer-term Treasuries after the GDP report, with the benchmark 10-year bond falling to 1.65 percent. It then rose to 1.68%. US stocks rose, with the S&P 500 advancing only 0.2 percent at noon.
The Federal Reserve Wednesday recognized progress in the economic recovery, but argued that its future trajectory “would depend significantly on the evolution of the virus”. Jay Powell, the chairman of the Fed, said that while “the recovery has progressed faster than expected, it remains uneven and far from complete.”
Indeed, despite the improvement, the labor market is far from recovering all the jobs lost since the start of the pandemic. Powell noted on Wednesday that a month exceptional job growth was “not enough”.
“The Fed will clearly recognize this as an important factor in judging the overall recovery,” said Padhraic Garvey, global head of debt and interest rate strategy at ING. “More importantly, this is a different kind of Fed, in that their focus is on the most vulnerable households affected by Covid, rather than the median household.”
A separate Department of Labor report Thursday showed 553,000 Americans filed for new unemployment benefits last week, the lowest level since the start of the pandemic but still historically high. Nearly 16.6 million Americans continue to seek unemployment benefits more than a year since the start of the pandemic.
The Fed, which has indicated that it is in no rush to remove its super-easy monetary policy, forecast 6.5% GDP growth 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 lead trader at Incapital, raised concerns about the economy’s growth trajectory once the effects of Covid’s latest stimulus package wear off. are mitigated.
“I wonder how far the economy can grow without the help of stimulus measures, but that may not matter in the short term as the administration is planning another round of spending to stimulate the economy. ‘economy.