At 6.4%, US Economy Registers Biggest Growth In 18 Years! Good News For Global Economy?

Experts are forecasting a further expansion of the economy by 3.1% in the second quarter.

The US economy is showing signs of returning to pre-pandemic levels as it has registered a GDP growth of 6.4% in the first quarter of the year.


Economy Bouncing Back

Experts are forecasting a further expansion of the economy by 3.1% in the second quarter- i.e. 13% on an annualised basis.

America is seeing its 2nd quickest GDP growth since Q3 2003 and a complete recovery is being predicted to come around late 2023.

The figures hold implications for the pace of economic expansion going by the current growth rate extended to a year. 

Rise In Personal Income And Spending

This growth has been fueled by increased spending by confident consumers who are making use of pent up savings from a year of lockdowns, a minimum $2 trillion, and their stimulus checks. 

Increased consumer spending which contributes more than 2/3rds of economic activity in the US was observed with purchases of furniture, electronics, autos, homes and services such as dining and hospitality. 

Government spending also rose to 14% in that period. 

Inflation Worries

Businesses are also reopening but these trends have caused prices to rise, with an inflation metric posting a rise of 3.5% in the period of January-March.

Jerome Powell, chief of the US Federal Reserve, sought to allay inflation concerns by saying that price surges are attributable to steep declines in prices that was seen when the pandemic broke out.

A role is also being played by bottlenecks in supply chains due to its restarting from shutdowns. 

Powell maintains that both these factors are transient in nature.

Future Scenario

Stimulative economic measures will continue such as near-zero interest rates until the employment situation is stabilised and inflation exceeds the target. 

The momentum is showing all signs of continuing with relief-oriented policymaking, widespread vaccinations and labor market recovery.

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