U.S. economy grew strongly in the first three months of 2021
The U.S. economy grew at a brisk 6.4% annual rate last quarter, powered by consumers, government aid and declining coronavirus cases.
The nation's gross domestic product — the total output of goods and services — accelerated in the January-March quarter from a 4.3% annual gain in the final quarter of 2020, the Commerce Department said on Thursday. The increases were led by growing spending on durable goods, especially vehicles and at restaurants and bars.
"In early 2021, the U.S. economy was served a strong cocktail of improving health conditions and rapid vaccinations, along with a fizzy dose of fiscal stimulus and a steady flow of monetary policy support," analysts with Oxford Economics said in a note.
Biggest quarterly jump since 2003
Excluding the quarter immediately following the coronavirus crash last summer, this is the fastest rate of economic growth since the third quarter of 2003, according to the Federal Reserve Bank of St. Louis.
Analysts expect growth in the current quarter to be faster still, potentially reaching a 10% annual pace or more. That is likely to be led by consumers eager to travel, shop, dine out and otherwise resume their spending habits as COVID-19 cases abate and vaccinations rise.
Economists say that widespread vaccinations, the reopening of more businesses, a huge infusion of federal spending and healthy job gains should help sustain steady growth. For 2021 as a whole, they expect the economy to expand close to 7%, which would mark the fastest calendar-year growth since 1984.
Employment is also gradually recovering. The number of Americans filing new unemployment claims — a proxy for layoffs — fell to a new pandemic-era low on Thursday, the Labor Department reported.
"An avalanche of good economic news was released this morning, with everything from a strong first quarter GDP, to a big leap in consumer spending, to a bounceback in the already high savings rate," Robert Frick, corporate economist at the Navy Federal Credit Union, said in a statement. "We're still probably a couple years away from pre-pandemic employment levels, but based on the powerful economic momentum built up in the first quarter, we should return close to a fully functioning economy in the second quarter."
Consumers flush with cash
A major reason for the brightening expectations is the record-level spending that is poised to flow into the economy. A $1.9 trillion package that President Joe Biden got through Congress in March provided, among other rescue aid, $1,400 stimulus payments to most adults.
"[H]ouseholds are still flush with cash and, now that restrictions are being eased as the vaccination program proves a success, that will allow them to boost spending on the worst-affected services," economists at Capital Economics wrote in a research note.
On top of that, Mr. Biden is proposing two additional huge spending plans: a $2.3 trillion infrastructure package and a $1.8 trillion investment in children, families and education that the president promoted Wednesday night in his first address to a joint session of Congress.
CBS News' Irina Ivanova contributed reporting.