The United States embarks on a new recovery gear in the first quarter of 2021, accelerating at an annualized pace of 6.4%, driven by consumption which accounts for more than two thirds of output. Growth was 1.6% in the quarter compared to the immediately preceding three months. The march of GDP – supported by the recession of the pandemic in the US, by strong emergency aid from the government and by monetary policy stimuli from the Federal Reserve – could bring the economy closer to pre-pandemic levels. Wall Street, also driven by robust quarterly performance by American giants starting with Big Tech, opened higher after the data.
Investments alongside personal spending
Crucial personal consumption spending spiked by 10.7% on an annual basis, the second largest ever since the 1960s. Corporate, non-residential investments rose by 9.9 percent. On the other hand, the impact of trade balance and company inventories was negative. Analysts’ average forecasts for growth between January and March were 6.1%, even though Bloomberg had raised them to 6.7% and the Central Bank’s Atlanta-based Fed Now model, which constantly updates data, has also recently traveled at 8 percent.
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Powell, recovery but still not enough
Nor should the US economy run out of support in the foreseeable future. At the end of the last Fed summit meeting on Wednesday, chairman Jerome Powell recognized the improvement underway in the economy, speaking of “a strong rebound in activity.” But he added that there is still a way to go towards the central bank’s ideal employment and inflation targets, confirming without changes an ultra-accommodative policy with zero interest rates and continuous asset purchases. Joe Biden’s administration approved a new $ 1,900 billion relief round in March, including $ 1,400-per-person income support checks for most Americans who have arrived in the past month.
New support plans proposed by Biden
Biden also relaunched ambitious plans for further long-term support in his first speech to Congress on Wednesday evening. A total of another 4,100 billion is at stake in ten years for infrastructure (2,300 billion) and social and household spending (1,800 billion), financed with tax increases from large companies and higher incomes. An unprecedented expansion of the federal government’s reach in the United States.
Fresh from the 2020 crisis
US GDP was back from an annualized growth of 4.3% in the fourth quarter of 2020 and over 33% in the third, when it rebounded from the actual lockdown caused by the coronavirus. 2020 closed with a contraction of 3.5% on an annual basis, the most severe in 74 years, and of 2.4% measured in the fourth quarter on the fourth quarter, the first since the 2007-2009 crisis.