A good start in the US economy marks a great year

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From 2021, consumers rocked the pandemic blues and boosted the purchase of cars and other commodities, paving the way for the fastest economic growth in decades.

The first reading of the country’s first-quarter economic performance, delivered by the Commerce Department on Thursday, showed many were still far from normal. Even with a significant increase in personal income, expenses for travel, food and even services such as health care increased only slightly.

But economists say that is already changing as more vaccines are offered and trade restrictions related to coronaviruses are relaxed. Americans have plenty of reasons to go out because of the good weather, the accumulated savings over years of blockade, and the itch to make up for enforced inactivity.

Gregory Dako, Chief US Economist at Oxford Economics, said: “Consumers who are confident in their prospects will generally have more freedom.”

Overall, gross domestic product, the broadest measure of the economy, grew 1.6% in the first three months of 2021, up from 1.1% in the last quarter of last year. On an annual basis First quarter growth was 6.4%..

Total economic output is expected to return to pre-pandemic levels by the summer – in fact, Daco believes he has already. His company predicts the economy will grow 3.1% in the second quarter, or about 13% on an annual basis. Annual growth is expected to be 7.5%, the best performance since 1951.

“This may be the tip of the iceberg,” Daco said. “I think there will be a much stronger dynamic towards the summer as health continues to improve, political support continues to be implemented and employment is strengthened.”

Aided by several government bailout payments, households in the first quarter achieved a total of $ 4.1 trillion in savings, up from $ 1.2 trillion before the start of the pandemic.

As near-banned service flourishes and customers flock to the reopened facilities, it should find a way into the economy. Daco expects consumer spending to increase by more than 9%, a record this year.

The previous quarter’s expansion was fueled by two government payments to most Americans. $ 600 per person from the relief program enacted by the end of 2020, and an additional $ 1,400 from the law approved in March. This quickly led to the purchase of cars, furniture, appliances, clothing, and food.

After the first bailout check last year, there was a similar increase in income, which also prompted a rebound in spending on commodities.

Ben Herzon, executive director of forecasting company IHS Markit, said: “If they don’t spend their time on services because they don’t go to the movies or to the theme parks, they will benefit from the product.”

He said he expects spending on commodities to decline in the second quarter as spending on services begins to pick up more sharply.

Private consumption grew 2.6% in the first three months of this year, with a 5.4% increase in product purchases accounting for the bulk of the growth. Spending on sluggish services throughout the pandemic rose 1.1%.

Ian Shepherdson, chief economist at Pantheon Macro Economics, said: “But in the quarters to come, the economy will be much less dependent on stimuli as individuals will use up the savings they have accumulated during the pandemic.”

The underlying strength of the economy is evident in the strong corporate earnings recently reported by many companies. More than triple the profit compared to the last quarter Revenue rose 44% to $ 108.5 billion, but topped $ 8 billion.

One of the notable aspects of economic activity this quarter was spending on automobiles and parts. This has increased by almost 13% in the past three months. Strong consumer demand and tight stocks pushed prices up.

Low interest rates, readily available credit, rising home and stock prices, and high trade-in prices for used models also make it easier for consumers.

At AutoNation, the largest dealer chain in Japan, many vehicles are sold at sticker prices even before they arrive from the factory. “These vehicles come and go,” CEO Mike Jackson said.

Dako believes that even if economic output returns to what it was before last year, it wouldn’t be where it would be without a pandemic. In addition, economists say jobs will likely take some time next year to regain ground lost in the wake of the pandemic.

The labor market emphasizes the unequal distribution of economic distress. White-collar workers were able to travel easily to work from their homes and rely on services like Netflix and DoorDash for their needs, but blue-collar workers and low-educated Americans have been hit hard. I am. And while household savings globally increase, many families have seen their finances wiped out.

The· Unemployment rate The percentage of high school graduates in March was 6.7%, compared with 3.7% for Americans with a college degree. Members of minority groups have also been severely affected, with blacks having an unemployment rate of 9.6% compared to 5.4% for whites.

However, recruitment seems to be catching up. last month, The employer added 916,000 jobs The unemployment rate has fallen to 6%, but initial jobless claims have fallen sharply in recent weeks. First application for state unemployment benefit It has fallen to the lowest level of the pandemic for three consecutive weeks.

Tom Gimbel, CEO of LaSalle Network, the Chicago-based recruiting and dispatching company, said: Currently there are 50% more positions than before Covid. “

He said there is a high demand for professionals in fields such as accounting, finance, marketing and sales, and hiring for mid-career to mid-career positions is stronger. “Companies are putting in place administrative support and supply chains,” he said. “We think it’s good for at least 18 months to 2 years.”

Sufficient savings and growing consumer optimism give businesses the confidence to bet on the future. Business investment rose 2.4% in the first quarter, above pre-pandemic levels. Spending on housing construction rose 2.6%.

Michael Gappen, chief US economist at Barclays, said economic growth would have been even stronger without lower inventories. Supply chain constraints and shortages of parts such as semiconductors are causing production disruptions, he said, especially in the automotive sector.

He added that it should be relaxed in the coming months, especially as companies get more bullish consumer indices.

“We are in the early stages of what could be a very good 6-9 months for the US economy out of the pandemic,” he said. “The best has not yet come.”

Ben Casselman, Neil E. Boudette and Sydney Ember Contribution report.

A good start in the US economy marks a great year

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