US economic recovery picks up in Q1 as consumer spending rises

GDP expanded at a 6.4% annualised rate during the first quarter, official data showed

Consumer spending helped drive economic growth in the US during the first quarter. (AP Photo/Mark Lennihan)

US economic growth accelerated in the first quarter as a rush of consumer spending helped bring total output to the cusp of its pre-pandemic level.

Gross domestic product expanded at a 6.4 per cent annualised rate following a softer 4.3 per cent pace in the fourth quarter, the Commerce Department’s preliminary estimate showed on Thursday. Personal consumption, the biggest part of the economy, surged an annualised 10.7 per cent, the second-fastest since the 1960s.

The inflation-adjusted value of domestically produced goods and services climbed to an annualised $19.09 trillion, indicating GDP will soon eclipse the pre-pandemic peak of nearly $19.3tn.

Rising vaccinations, faster job growth and two rounds of federal stimulus payments combined to supercharge household spending. As government restrictions on activity are widely lifted, consumer demand is seen broadening and driving outlays for long-downtrodden services such as travel and leisure.

A host of high-frequency data, including restaurant and air travel bookings, already confirms a rapidly improving economy that has helped drive stock prices to fresh highs.

The pent-up demand that’s seen driving outsize growth this year is propelling prices skyward at the same time producers are experiencing material shortages and supply-chain challenges. Further, the Biden administration and the Federal Reserve are pushing ahead with policy prescriptions that provide even more juice for the economy.

The median forecast in a Bloomberg survey of economists called for 6.7 per cent growth in the January to March period.