US first quarter GDP unchanged at robust 6.4 per cent annual rate

Economists believe GDP growth could top 10 per cent in the April-June quarter

In this photo provided by the New York Stock Exchange, traders gather at a post on the floor, Wednesday, May 26, 2021, in New York. U.S. stocks edged higher in morning trading Wednesday as investors continue to monitor the economic recovery and rising inflation. (Courtney Crow/New York Stock Exchange via AP)

The US economy grew at a robust annual rate of 6.4 per cent in the first three months of this year, unchanged from the government’s initial estimate.

The recovery from last year’s deep recession gained steam at the beginning of this year, helped by vaccines to combat the virus and trillions of dollars in government assistance.

The rise in the gross domestic product (GDP) was the same as the government’s first look one month ago, the Commerce Department reported on Thursday.

Upward revisions in spending by consumers, who account for two thirds of economic activity, were offset by weaker growth in exports.

Economists believe GDP growth could top 10 per cent in the current April-June quarter.

“When provided with the ability to spend in a safe way, consumers have the will and the desire to do so,” said Lydia Boussour, lead US economist for Oxford Economics.

Ms Boussour said she expected GDP in the current April-June period would be around 13 per cent and the gains this quarter will allow the economy to recoup all of the output lost during the recession.

With the first quarter advance, GDP is only 0.9 per cent below the level in the fourth quarter of 2019, before the country’s longest economic expansion ended in the first quarter of 2020.

Many economists are forecasting the economy will grow between 6 and 7 per cent this year, which would be the strongest performance since a 7.2 per cent surge in 1984, another year when the economy was recovering from a deep recession.

But Oxford Economics is forecasting growth this year of around 7.7 per cent, the strongest annual gain since 1951.

The 6.4 per cent first-quarter performance represented an improvement after GDP growth slowed to a 4.3 per cent rate in the final three months of last year, a time when rising coronavirus cases and waning government support raised fears that the country could tip back into recession.

But passage of about $3 trillion in extra government support in December and March, as well as widespread introduction of vaccines, has allowed thousands of businesses to reopen and millions of people to go back to work.

Thursday’s report was the government’s second of three examinations of GDP performance in the first quarter.

The report showed that consumer spending grew at a sizzling annual rate of 11.3 per cent, even better than the 10.7 per cent estimate made a month ago.

Business investment spending was also up and residential construction, which has been a standout performer over the past two years, grew at 12.7 per cent annual rate, better than the 10.8 per cent gain first estimated

However, those areas of stronger growth were offset by weak US export sales, which fell at an annual rate of 2.9 per cent, larger than the 1.1 per cent rate of decline reported a month ago.

While exports were falling, imports were rising with the US economy emerging from the pandemic recession more quickly than many other parts of the world.