US economic growth accelerated in Q1, jobless claims decrease for the fourth consecutive week

On Apr 29, 2021

The US Gross Domestic Product increased at a 6.4% annualized rate in the first quarter, accelerating from 4.3% growth in the previous three-month period and beating expectations for 6.1% increase, in the second fastest GDP growth since the third quarter of 2003.

Strong economic rebound was inflated by two additional rounds of coronavirus relief money and easing concerns over the pandemic that prompted re-opening businesses, especially in the services sector and boosted domestic demand.

The US consumer spending, which accounts for more than two thirds of country’s economic activity, increased at a 10.7% rate in Q1 compared to 2.3% increase in Q4 2020 and was among the main drivers of the economic growth in last three months.

The initial relief package, worth $3 trillion, from former President Donald Trump’s government, was followed by nearly $900 billion stimulus in December, while the administration of President Joe Biden added another $1.9 trillion rescue package in March, supporting the unemployed and households, as well as helping economic recovery.

The analysts expect the economy to expand further in coming months as improved health conditions, rapid vaccinations, steady monetary policy support and fresh fiscal stimulus strongly boost economic growth.

The US Federal Reserve pointed to rapidly accelerating economy at the end of their two-day policy meeting on Wednesday but gave no signs it was ready to reduce its extraordinary support for the recovery.

The separate report showed further decrease in weekly jobless claims which fell 13,000 to 553,000 in the week ending April 24, from 566,000 previous week and being in steady decline for the fourth consecutive week.

Better than expected jobless claims figures add to signals that US labor sector is recovering but it remains 8.4 million jobs below its pre-pandemic peak in February last year, while 16.6 million Americans still receiving unemployment benefits, that may continue to negatively impact the economic recovery.