The U.S. economy grew at a yearly pace of more than 6 percent in the first quarter of 2021, according to data released Thursday by the Commerce Department.
U.S. gross domestic product (GDP) grew at a seasonally adjusted annualized rate of 6.4 percent in the first three months of 2021, according to the Bureau of Economic Analysis's (BEA) final estimate of first quarter growth. The BEA’s previous two estimates of first quarter growth were also 6.4 percent, up from a lackluster 2 percent in the fourth quarter of 2020.
Most economists expect U.S. growth to end up between 7 and 8 percent this year as the country suppresses the COVID-19 pandemic, businesses reopen to full capacity and millions of unemployed Americans return to work. The median estimate of 2021 GDP growth among Federal Reserve officials also rose from 6.5 percent in March to 7 percent in new projections released last week.
Economic growth is expected to have accelerated in the second quarter, which ends in August, even as the U.S. adds fewer jobs than widely expected.
Inflation as measured by the personal consumption expenditures (PCE) index — the Federal Reserve’s preferred gauge of price increases — also rose sharply from the fourth quarter of 2020.
The PCE index rose to an annualized rate of 3.7 percent in the first quarter, up from 1.5 percent in the fourth quarter. The index minus food and energy prices, which are more volatile, rose 2.5 percent.
While inflation has risen well above the Fed’s annual target of 2 percent, Fed officials and many other economists say it’s simply a reflection of prices climbing back from pandemic lows and short-term supply shortages. Even so, many Republican lawmakers and some right-leaning economists say President Biden’s proposed multitrillion-dollar spending proposals could push inflation to unsustainable levels.