Increases in durable goods, led by motor vehicles and parts; non-durable goods led by food and beverages

The American economy registered a 6.4 per cent increase during the first quarter of 2021.

This is an incredible comeback as consumers regain confidence and begin spending. Apple, Walmart and Amazon have posted huge profits on the back of a demand for goods and services.

Estimates released by the US Bureau of Economic Analysis (BEA) showed that for the fourth quarter of 2020, real Gross Domestic Product (GDP) in America grew by 4.3 per cent. The BEA says, “the upward movement in real GDP for the first quarter reflected positive contributions from personal consumption expenditures (PCE), non-residential fixed investment, federal government spending, residential fixed investment, and state and local government spending”.

This movement was partly offset by negative contributions from private inventory investment and exports. Imports also increased.

Notably, the increase in PCE was due to increases in durable goods, led by motor vehicles and parts; non-durable goods, led by food and beverages as well as services, which is led by food services and accommodations. The increase in non-residential fixed investment is primarily attributable to increases in equipment led by information processing equipment and intellectual property products, which is led by software.

Increase in federal government spending

The BEA states that, “the increase in federal government spending primarily reflected an increase in payments made to banks for processing and administering the Paycheck Protection Program loan applications as well as purchases of COVID-19 vaccines for distribution to the public. The decrease in private inventory investment primarily reflected a decrease in retail trade inventories.”

Current dollar GDP increased 10.7 per cent or US$554.2 billion in the first quarter to a level of US$22.05 trillion. In the fourth quarter, GDP increased 6.3 per cent or US$324.5 billion.

In the first quarter of 2021, the price index for gross domestic purchases went up 3.8 per cent when compared to a similar rising by 1.7 per cent in the fourth quarter of 2020. In addition, the PCE price index increased 3.5 per cent relative to an increase of 1.5 per cent.

With the exception of the food and energy prices, the PCE price index climbed 2.3 per cent versus an increase of 1.3 per cent.