Consumers shook off the pandemic blues as 2021 began, putting stimulus checks to work buying cars and other goods and helping set the stage for what could be the fastest economic growth in decades, according to Nelson D. Schwartz for a report published by The New York Times.
The initial reading on the country’s first-quarter economic performance, delivered Thursday by the Commerce Department, showed that much remained far from normal. Even with a big jump in personal income, there was only a modest increase in spending on services like travel, dining and even health care.
But economists say that is already changing as more vaccinations are delivered and coronavirus-related business restrictions are eased. With better weather, savings accumulated during a long year of lockdowns, and an itch to make up for forced inactivity, Americans will have plenty of reasons to go out and spend.
“Consumers are now back in the driver’s seat when it comes to economic activity, and that’s the way we like it,” said Gregory Daco, chief U.S. economist at Oxford Economics. “A consumer that is feeling confident about the outlook will generally spend more freely.”
Overall, the broadest measure of the economy — gross domestic product — grew by 1.6% in the first three months of 2021, compared with 1.1% in the final quarter of last year. On an annualized basis, the first-quarter growth rate was 6.4%.
The total economic output should return to pre-pandemic levels by summer — in fact, Daco believes it has already done so. His firm estimates that the economy will expand by 3.1 percent in the second quarter or about 13% on an annual basis. For the year, it expects growth of 7.5 percent, the best performance since 1951.
“This may be the tip of the iceberg,” Daco said. “I think we will see much stronger momentum into summer as health conditions continue to improve, policy support remains in place and employment strengthens.”
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