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Summary
- This strong impetus in the economy reflects the increased consumer spending, a key factor of GDP growth.
- A raft of government measures from rapid vaccination to financial aid to US households has helped rekindle demand, which pushed the first-quarter surge in GDP output.
- Demand for big-ticket goods from cars, furniture, home-improvement equipment to bicycles grew, leading to increased economic activity during the period.
US gross domestic product (GDP), a measure of combined goods and services produced, grew at a seasonally adjusted annual rate of 6.4% in the first three months of 2021, amid a raft of measures to revive the economy from the Covid-19 crisis, the government said on Thursday.
The growth rate was just 1% below its peak in 2019. This strong impetus in the economy reflects the increased consumer spending, a key factor of GDP growth.
The US economy was badly hit after the covid emergency forced a nationwide lockdown to stop the virus. But the launch of vaccines and financial aid to the masses helped rekindle demand that pushed the first-quarter surge in GDP output, the Commerce Department said in a release.
The Recovery
The government’s covid relief, amounting to trillions of dollars, provided the much-needed cash to people, who had lost their jobs due to the pandemic, to keep them afloat through the hard times.
Demand for big-ticket goods from cars, furniture, home-improvement equipment to bicycles grew eventually, leading to increased economic activity witnessed during the period. The US jobless rate also began to improve as employers started hiring, especially in the hotel and restaurant businesses.
Economists described the covid-induced economic slump in the US as the worst since World War II. Despite this unprecedented contraction in the economy, resolute government efforts and resilience of the American people have been the most significant factor for the turnaround, they said.
Still, many businesses have reported poor supplies despite demand as manufacturers grappled to clear the backlogs after a long period of closure.
©Kalkine Group 2021.
Also Read: IMF Raises 2021 US Growth Forecast To 6.4%
The Covid Impact
The economic output in the second quarter of 2020 had fallen by around 30% while the unemployment rate jumped nearly 15%. Overall, the US economy had contracted 2.4% last year.
Congress has so far approved around US$5 trillion worth of covid aid for US households and businesses. Concurrently, the Fed pledged to maintain a loose monetary policy to spur growth, which includes keeping the interest rates low. Besides, the Biden administration has announced a new plan for American families under which a massive US$1.8 trillion has been allocated, aimed at addressing various shortcomings from education, healthcare, environment to livelihood.
Also Read: US Adds 916,000 Jobs in March; Jobless Rate Down 6%
Stimulus Payments Drive Growth
Maintaining the overall positive trend, the US unemployment rate has also come down to 6% as hiring picked up. The number of people filing for jobless benefits stood at 553,000 last week. The spike in hiring provided a balm to scores of people pushed into hardships.
Meanwhile, the US$1,400 monthly relief payments to American households and the rapid rollout of vaccines are giving a fresh impetus to the recovery and growth of the world’s largest economy.
