Economic growth is picking up speed, with GDP expanding at a rate of 1.6% in the first quarter of 2021, up from 1.1% in the fourth quarter of 2020, the Bureau of Economic Analysis announced Thursday. On an annualized basis, first quarter growth was a vigorous 6.4%, compared to 4.3% the quarter before.
Spurred in part by Covid relief payments from the federal government, a boom in consumer spending helped push economic output to $19.1 trillion, close to its pre-pandemic level of nearly $19.3 trillion. Personal consumption rose at an annualized rate of 10.7% during the first three months of the year, the second fastest clip in 50 years, while spending on durable goods rose by 41.4%.
“Rising vaccinations, faster job growth and two rounds of federal stimulus payments combined to supercharge household spending,” Bloomberg’s Reade Pickert said.
Business investment and housing construction surged, too, at rates of 9.9% and 10.8% respectively.
A separate report from the Labor Department showed that new jobless claims extended a three-week downward trend, hitting a new pandemic low. About 553,000 people applied for unemployment benefits in state systems last week, and another 122,000 applied through the temporary Pandemic Unemployment Assistance program, bringing the total to 675,000.
“Claims are extremely high, but moving in the right direction,” Heidi Shierholz of the Economic Policy Institute said.
More growth ahead: Economists are expecting to see even higher growth in the second quarter. Experts polled by Bloomberg predict a growth rate of 9.6% during the April through June period, while others are projecting rates over 10%.
“We are seeing all the engines of the economy rev up,” Gregory Daco, chief economist at Oxford Economics, told the Associated Press. “We have an improving health environment, fiscal stimulus remains abundant and we are starting to see rebounding employment.”
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the report was likely the first in a series. “It’s good news, but the better news is coming. There’s nothing in this report that makes me think the economy won’t grow at a gangbusters pace in the second and third quarter.”
Shepherdson also said that he expects the recovery to rely less on government spending moving forward: “This demonstrates the value of government intervention when the economy is on its knees from Covid. But in the coming quarters, the economy will be much less dependent on stimulus as individuals use the savings they’ve accumulated during the pandemic.”