The US economy grew at a solid 6.4 per cent rate in the first three months of the year, setting the stage for what economists believe may be the strongest year for the economy in about seven decades.
Growth in the gross domestic product, the country’s total output of goods and services, was unchanged from two previous estimates, the Commerce Department said on Thursday, an acceleration from the 4.3 per cent pace of the fourth quarter.
Economists believe that economic growth has continued to accelerate in the current quarter, which ends this month, as vaccinations become widespread and Americans eager to get outside are being welcomed by newly re-opened businesses.
Surging activity from consumers is being fuelled in part by nearly $3 trillion in financial support that the government has approved since December.
Additional economic data that emerged on Thursday also points to a nation that has regained its footing quickly after being thwacked by a global pandemic, though jobless claims remain stubbornly above 400,000.
“This summer will be hot for the US economy,” said Lydia Boussour, lead US economist for Oxford Economics.
“As the health situation continues to improve, consumers sitting on piles of savings will give into the urge to splurge on services and experiences they felt deprived of during the pandemic.”
Ms Boussour forecast that GDP growth in the current April-June quarter will surge to an annual rate of 12 per cent and growth for the entire year will come in at 7.5 per cent. That would be the best annual performance since 1951.
Even economists whose forecasts for 2021 growth range from 6 to 7 per cent believe growth this year will be the best since a 7.2 per cent gain in 1984, when the US was emerging from an extended and painful recession.
Consumer spending, which accounts for more than two-thirds of economic activity, grew at a sizzling annual rate of 11.4 per cent in first three months of the year, the Commerce Department said.
It’s likely that some of that spending is being juiced by a round of $1,400 individual payments that were included in the $1.9 trillion support package Congress passed in March.
The first-quarter spending gain reflected increases in goods purchases, led by auto sales, and gains in spending on services, led by food services and travel accommodations, two areas that have benefited from the re-opening of the economy as vaccinations have increased.
Economists believe growth this quarter will be enough to push GDP output above the previous peak reached at the end of 2019 before the pandemic struck and cut off the longest economic expansion in US history.