First quarter GDP unchanged at a robust annual rate of 6.4%
WASHINGTON – The US economy grew at a robust 6.4% annual rate in the first three months of this year, unchanged from the government’s initial estimate. The recovery from last year’s deep recession gathered pace early this year, helped by vaccines to fight the virus and billions of dollars in government aid.
The rise in gross domestic product, the economy’s total output of goods and services, was the same as that announced by the government a month ago, the Commerce Department reported Thursday. Upward revisions to consumer spending, which accounts for two-thirds of economic activity, were offset by weaker export growth.
Economists believe GDP growth could exceed 10% in the current April-June quarter.
“When given the opportunity to spend safely, consumers have the will and the desire to do so,” said Lydia Boussour, chief US economist for Oxford Economics.
Boussour said she expects GDP in the current April-June period to be around 13% and that the gains this quarter will allow the economy to recover all the output lost during the recession. . With the first-quarter advance, GDP is only 0.9% below the level of the fourth quarter of 2019, before the country’s longest economic expansion ended in the first quarter of 2020.
Many economists expect the economy to grow between 6% and 7% this year, which would be the best performance since a 7.2% rise in 1984, another year when the economy was recovering from a deep recession. But Oxford Economics predicts growth this year of around 7.7%. That would be the biggest annual gain since 1951.
The 6.4% performance in the first quarter represented an improvement after GDP growth slowed to a rate of 4.3% in the last three months of last year, a period when the increase in cases coronavirus and declining government support have raised fears that the country could slide back into recession.
But the passage of nearly $3 trillion in additional government support in December and March, along with the widespread introduction of vaccines, has allowed thousands of businesses to reopen and millions of people back to work.
Thursday’s report was the second of three government looks at first-quarter GDP performance.
It showed that consumer spending grew at a blistering 11.3% annual rate, even better than the 10.7% estimate made a month ago. Business investment spending also increased and residential construction, which has performed exceptionally well over the past two years, rose 12.7% year-on-year, better than the 10.8% gain initially estimated. .
However, these areas of stronger growth were offset by weak export sales to the United States, which fell at an annual rate of 2.9%, higher than the 1.1% rate of decline recorded there. a month ago.
As exports fell, imports rose, with the US economy emerging from the pandemic recession faster than many other parts of the world.
With strong demand from US consumers, imports grew at an annual rate of 6.7% in the first quarter. The trade deficit, the gap between imports and exports, widened in the first quarter and subtracted 1.2 percentage points from overall growth.
Business inventories were also reduced in the first quarter as businesses were unable to meet rising demand. Falling inventories subtracted 2.788 percentage points from first-quarter growth. However, that should translate into stronger growth in the second quarter as businesses scramble to restock empty store shelves.
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