The U.S. economy grew 6.4 percent in this year’s first quarter, led by the return of consumer spending, the U.S. Commerce Department reported.
In mid-March, consumers’ outlays were 29 percentage points higher than in March 2020, according to the Wall Street Journal.
Consumers began the new year venting pent-up demand, spending particularly on goods and less on services.
Armed with a round of stimulus checks and 2020’s unspent savings, many bought cars, furniture, and other pricey items, pushing up spending on durable goods – those that last at least three years – by 41.4 percent, according to the WSJ.
Congress primed the economic recovery with almost $5 trillion in various forms of ai,d and the U.S. Federal Reserve has held interest rates near zero since March 2020, driving a record number of sales of existing homes last year.
Rough Road Ahead
The recovery, however, is lurching forward unevenly. Spending at restaurants remains 19 percent below its pre-pandemic level, transportation services are taking in 23 percent less, and recreational services are languishing at 31 percent below their 2019 mark.
Spending by state and local governments is down by 4.3 percent, about $89 billion.
TREND FORECAST: The 2021 three-month spending surge put the nation’s GDP just 1 percent below its peak reached late in 2019. We maintain our forecast for the “Biden Bounce” through the year, with the U.S. economy notching growth between 6 and 7 percent in 2021.
Should a wildcard event suddenly crash the equity markets – which are overdue for a major hit – when Wall Street crashes, Main Street will fall deeply into the “Greatest Depression.”
