Today, we present more evidence that the U.S. economy has taken off like a rocket.
Gross domestic product rose at a 6.4% annual pace last quarter, the second-fastest pace since 2003.
Consumers drove this increase, as their spending rose at a 10.7% annual rate, compared to just 2.3% in 2020’s fourth quarter. Spending on durable goods rose 41.4%, led by a 51.5% jump in motor vehicles and parts.
To illustrate how crazy things have been over the past year, here is the percentage change in consumer spending from the prior quarter:
To quote the Grateful Dead, “What a long, strange trip it’s been.”
Increasing vaccinations and business reopenings, combined with government stimulus, can take the credit for getting consumers to get out and spend, spend, spend.
GDP is now just 1% below where it was before the pandemic. What a comeback!
Expect economic growth to remain strong as vaccinations continue and life gets closer to normal. Mayor de Blasio announced yesterday that New York City will be fully open on July 1—a day we thought would never come.
In other great news, initial claims for unemployment fell to 553,000 last week, their lowest level since the COVID-19 pandemic began. While that’s still a very high number, at least they are at levels we’ve seen before. Initial claims came in above 553,000 101 times before the pandemic began.
The real story is that, like most parts of the economy, the labor market is headed in the right direction with its best days ahead.
And for some bonus good news, the Federal Reserve announced on Wednesday that it’s leaving short-term rates near zero. I think that’s a bit risky with the economic growth we’ve seen lately, but as my grandmother used to say, “When somebody tries to give you money, take it.”
Have a great weekend.