Washington (AP) – With the help of consumers, the US economy grew at a rapid rate of 6.4% last quarter. It shows the power of stimulating state aid և reducing viral cases that can bring further profits as the country unexpectedly accelerates from the epidemic. decline
A report by the Department of Commerce on Thursday estimated that the country’s gross domestic product, total output of goods and services, accelerated in the January-March quarter, compared with 4.3% annual profit in the last quarter of 2020.
It is expected that in April-June the growth will be even faster, possibly reaching 10% 10 more per year, which will lead to an increase in people who want to travel, shop, eat, or otherwise resume their spending habits.
Economists say widespread vaccinations, the reopening of more businesses, the huge injection of federal spending, and the acquisition of healthy employment should contribute to sustainable growth. For 2021 overall, they expect the economy to grow by about 7%, the fastest calendar year since 1984.
The main reason for the brightening of expectations is the record level of expenditures that are going to flow to the economy. The $ 1.9 trillion package that President Biden received through Congress in March provided, among other rescue assistance, a $ 1,400 stimulus to most adults.
In addition, Biden offers two additional huge spending plans. $ 2.3 trillion in infrastructure package և $ 1.8 trillion in child, family և education, promoted by the President in his first address to the Joint Session of Congress on Wednesday evening.
Significant support was also provided by the Federal Reserve’s low interest rate policy, which aims to encourage borrowing and spending. In fact, the economy is expected to expand so rapidly that some economists have expressed concern that it could fuel inflation.
This is partly due to the fact that higher demand has led to supply disruptions, a lack of components for some products, in particular semiconductors, which, among other things, are important for the automotive, technology and medical devices industries.
However, at a news conference after the last meeting of the Fed on Wednesday, President Jerome Powell reaffirmed his confidence that any increase in inflation would be temporary. And he said that the FRS wants to see a significant, sustained recovery before considering withdrawing its economic support. At the same time, Powell explained, the central bank is not even close to retreating into its extremely low interest rate policy.
The strength of the recovering US economy is particularly shocking, given the extent of the damage caused by the epidemic in March last year. With the business closed, the economy shrank at a record annual rate of 31% in the April-June quarter of last year, before jumping sharply in the following months.
“The economy is on fire,” said Sing Won Son, a professor of finance and economics at Loyola Marymount University, ahead of the release of a GDP report on Thursday. government spending. “
Economic gains have become more apparent in recent weeks. In March, U.S. employers added 916,000 jobs, the biggest hike since August. At the same time, the rate of decline has slowed, retail spending has risen, production has risen, and consumer confidence has peaked since the epidemic began.
Thursday’s GDP report showed that consumer spending, which accounts for more than two-thirds of the economy, rose at an annual rate of 10.7% in the January-March quarter, which accelerated significantly after spending slowed to 2 2. , 3% of annual profit. three months of last year.
Business investment grew at a strong annual rate of almost 10%, reflecting a large surge in equipment costs. The housing sector, which has seen low mortgage rates over the past year, grew at an annual interest rate of about 11% in the first quarter, but is still stable compared to the fourth quarter.
Over the past quarter, public spending rose 6.3 percent year on year after two consecutive declines, reflecting weakness at the state-local level as the epidemic decline reduced tax revenues.
Entrepreneurs slowed the pace of inventory processing in January-March, shaving by 2.6 percentage points over the quarter. The growing trade deficit slowed growth by 0.8 percentage points.
Moody’s Analytics chief economist Mark Andy said ahead of the GDP report on Thursday that all signs point to an economic boom this year that will be boosted by strong government support and a flood of demand as the economy reopens.
“This must be a gangster year,” he said. “I have been forecasting the economy for almost 30 years, I can not remember a moment when I was as confident as I am today.”