Tom Branna, Editorial Director04.29.21
The US economy rose 6.4% in the first quarter, driven by a $1.9 trillion stimulus package, more Americans getting vaccinated and fewer consumers getting sick. The good news outweighed signs that inflation is growing and demand in some sectors is outstripping supply. Still, analysts had predicted the US economy would grow 6.7% in Q1.
The economic gains were made as vaccinations were distributed and coronavirus cases fell. About 43% of the population have received at least one coronavirus shot. The pandemic-related improvements helped personal consumption, the biggest part of the economy, surge an annualized 10.7%, the second-fastest since the 1960s.
Low interest rates and government stimulus on a unprecedented scale have also push the economy into overdrive. Much of the stimulus has yet to be spent, and the Biden administration is aiming to spend even more money. In his address to Congress last night, President Joe Biden unveiled $1.8 trillion in additional spending.
Assuming the virus stays contained, the economy should grow quite rapidly through the rest of the year, especially if companies hire or rehire the millions of people who are still out of work because of the pandemic.
GDP is forecast to grow 8.2% in the second quarter. At the same time, inflation pressures are growing. Procter & Gamble said earlier this month that it will raise prices for household staples like tampons and diapers. One of P&G's key competitors, Kimberly-Clark, has also announced plans to raise prices. Some observers have suggested that as Americans put $1.6 trillion in stimulus money to work, it could cause the economy to overheat. Since the Great Recession, inflation has hovered around 2%, but with more corporations considering price hikes, that 2% level may be breached.
The economic gains were made as vaccinations were distributed and coronavirus cases fell. About 43% of the population have received at least one coronavirus shot. The pandemic-related improvements helped personal consumption, the biggest part of the economy, surge an annualized 10.7%, the second-fastest since the 1960s.
Low interest rates and government stimulus on a unprecedented scale have also push the economy into overdrive. Much of the stimulus has yet to be spent, and the Biden administration is aiming to spend even more money. In his address to Congress last night, President Joe Biden unveiled $1.8 trillion in additional spending.
Assuming the virus stays contained, the economy should grow quite rapidly through the rest of the year, especially if companies hire or rehire the millions of people who are still out of work because of the pandemic.
GDP is forecast to grow 8.2% in the second quarter. At the same time, inflation pressures are growing. Procter & Gamble said earlier this month that it will raise prices for household staples like tampons and diapers. One of P&G's key competitors, Kimberly-Clark, has also announced plans to raise prices. Some observers have suggested that as Americans put $1.6 trillion in stimulus money to work, it could cause the economy to overheat. Since the Great Recession, inflation has hovered around 2%, but with more corporations considering price hikes, that 2% level may be breached.