Economic growth in the United States likely accelerated in the first quarter, fueled up by substantial government assistance to households and a business, setting the stage for what is projected to be the best year in nearly four decades.
The US economy is recovering faster than its global competitors, thanks to two additional rounds of COVID-19 relief fund from Washington, as well as reduced pandemic fear, which has boosted domestic demand and enabled service businesses like restaurants and bars to reopen.
Though, the expected increase in GDP last quarter will leave production just below where it was at the end of 2019, the economy is still at least a year away from completely emerging from the pandemic recession that began in February 2020.
On Thursday at 8:30 a.m. EDT, the Commerce Department will release its first-quarter GDP snapshot (1230 GMT).
“The GDP number will be solid,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “It’s only one of several milestones we need to cross before we can claim we’ve completely recovered from the recession.”
According to a Reuters poll of economists, the economy expanded at a 6.1 percent annualised pace in the first three months of the year. It would be the second-fastest GDP growth rate since the third quarter of 2003, and it would come after a fourth-quarter rate of 4.3 percent.
The survey was conducted, however, prior to the release of March durable goods orders, goods trade deficit, and wholesale & retail inventories data this week. Following the durable goods numbers, Goldman Sachs economists lowered their GDP growth forecast by one-tenth of a percentage point to 7.4%.
Following the release of the goods trade deficit and inventory results, they revised their forecast to a 7.7% growth rate.
Early in the pandemic, former President Donald Trump’s administration issued nearly $3 trillion in relief funds, resulting in record GDP growth in the third quarter of 2020. Late in December, nearly $900 billion in additional stimulus was announced. In March, President Joe Biden’s administration announced a new $1.9 trillion bailout package, which included one-time $1,400 checks for eligible households and an extension of a $300 unemployment benefit until early September.
The Federal Reserve recognised burgeoning domestic activity on Wednesday, but it gave no indication that it was willing to scale back its extraordinary support for the recovery.
Some moderate Democrats may be less enthusiastic about Biden’s aggressive economic agenda due to the rapidly accelerating economy. In his first joint address to Congress on Wednesday, Biden announced a $1.8 trillion package for families and education. Republicans are opposed to further spending because they are concerned about the growing debt. The new package, along with a previous infrastructure and employment programme, totals about $4 trillion, which is comparable to the annual federal budget.
Some analysts are concerned that the huge government spending would trigger inflation. Many analysts, including Federal Reserve Chair Jerome Powell, believes that higher inflation would be temporary, citing the fact that the labour market is only 8.4 million jobs short of its peak, in February 2020.
