Consumer spending pushed the United States (US) economic growth expand to 6.4 percent in the first quarter (1Q) of 2021 in annual rate - Photo by the White House

JAKARTA (TheInsiderStories) – Consumer spending pushed the United States (US) economic growth expand to 6.4 percent in the first quarter (1Q) of 2021 in annual rate, Bureau of Economic Analysis (BEA) reported yesterday. It marked the second-fastest pace for growth since the 2Q of 2003 and was exceeded only by the reopening-fueled burst of 3Q in 2020.

The gross domestic product (GDP) grew by 1.6 per cent in the 1Q of 2021, compared with 1.1 per cent in the final quarter of last year. The economic activity boomed to start 2021, as widespread vaccinations and more fuel from government spending helped get the US closer to where it was before the pandemic struck.

Its reported, personal consumption expenditures increased by a robust 10.7-percent annual rate compared with a 2.3 percent increase in the previous period, while business investment in equipment and intellectual property products continued to grow steadily. US’ secretary of commerce, Gina Raimondo, said the country need the strategic investments included in the American Jobs Plan and American Families Plan to not only return to where we were prior to the pandemic, but to build the economy back better.

“We need big, bold actions that invest in our families, our workforce, and our infrastructure that position America to out-compete on the global stage for decades to come,” she asserted.

The bureau reported, the expenditures increased 23.6 percent, but spending on services still grew by 4.6 percent. The spending exploded by 41.4 percent on durable goods. While, big consumer spending came thanks to another round of stimulus checks of US$1,400 and the savings rate soared to 21 percent from 13 percent in 4Q.

The commerce department also noted, the goods import rising 5.7 percent and exports declined by 1.1 percent in the same quarter. The government spending and investment rose 6.3 percent while inventories declined sharply, shaving 2.64 percentage points off the top-line GDP gain.

In the latest meeting on Wednesday, the Federal Reserves (Fed) noted that “indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak.” Earlier, the policymakers forecasted US GDP would surge by 6.5 percent in 2021, the fastest rate since the 1980s, up from previous estimation at 4.2 percent.

Powell claimed the Bank’ efforts have been helped by a wave of unprecedented pandemic fiscal relief measures rolled out by Biden’ administration. The US$1.8 trillion American Rescue Plan, together with the faster pace of vaccine roll outs have added fuel to the recovery, he adds.

Bidden plans to fund the package by nearly doubling the capital gains tax for Americans making over $1 million per year. But, Powell reminded, the improving economic backdrop has sparked inflation and US’ bond yields into life, stoking speculation over whether the Fed will have to tighten policy sooner than expected.

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