US: Real GDP growth likely to remain strong

Data released Thursday showed that real GDP grew at an annualized rate of 6.4% during the first quarter, according to preliminary data. Not only was the overall rate of GDP growth supported by strong growth in consumer spending, but spending on fixed investment also increased at a solid rate, analysts explain. Wells Fargo. They expect growth to remain robust.

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“After plummeting approximately 10% between the fourth quarter of 2019 and the second quarter of 2020, real GDP is now just 0.9% from its pre-pandemic peak.”

“The marked increase in the overall GDP figure was largely due to real personal consumption expenditures (PCE), which soared 10.7%. Not only did consumer spending on goods remain very strong, purchases of durable and non-durable goods shot up 41.4% and 14.4%, respectively, but spending on services increased 4.6% ”.

“But the strength in the overall GDP figure was not just limited to the real PCE, as fixed investment spending posted a solid 10.1% annualized increase in the first quarter. In this sense, business spending on equipment increased 16.7% and spending on intellectual property grew 10.1%. The strong growth in these areas reflects, at least in part, the hardware and software upgrades that are needed to support employees who work remotely. “

“Overall GDP growth could have been even stronger in the first quarter if real exports of goods and services had not declined by 1.1%.”

“We expect real GDP growth to remain robust due, in large part, to stifled demand for many services and the mountain of excessive savings that many households have accumulated. In fact, 2021 is likely to be the strongest year for US real GDP growth in nearly 40 years. “