Employment Recovery Accelerates... Inflation at Expected Level
[Asia Economy New York=Correspondent Baek Jong-min] The US first-quarter economic growth rate was recorded at an annualized 6.4%. The US economy has maintained growth for three consecutive quarters, marking a recovery from the damages caused by COVID-19.
The US Department of Commerce announced on the 29th (local time) that the first-quarter Gross Domestic Product (GDP) growth rate was recorded at an annualized 6.4%. This closely matched the Dow Jones experts' forecast of 6.5%. The Federal Reserve (Fed) expects the US economy to grow by 6.5% this year.
The US growth rate for the fourth quarter of last year was 4.3%. After two consecutive quarters of negative growth in the first and second quarters of last year, the US economy rebounded with a rapid growth of 33.4% in the third quarter.
The Wall Street Journal assessed that the US economy has recovered to a level slightly higher than before the COVID-19 outbreak last year. The US economy is estimated to have contracted by 2.4% last year.
The Biden administration’s $1.9 trillion additional stimulus package and the widespread distribution of COVID-19 vaccines are analyzed to have contributed to economic growth.
Economic indicators released on the same day also show signs of recovery. Consumer spending in the first quarter surged by 10.7%. The previous quarter’s growth rate was 2.3%.
Employment is also recovering. Last week, new unemployment claims dropped for the third consecutive week to 553,000, the lowest level since the COVID-19 outbreak.
Prices rose but remained within expectations. The Personal Consumption Expenditures (PCE) price index rose 2.3% in the first quarter, falling short of the expected 2.4%. The PCE had risen 1.3% in the fourth quarter of last year.
One day earlier, Federal Reserve Chair Jerome Powell reiterated that the current inflation is temporary, addressing concerns that maintaining an accommodative monetary policy and reopening economic activities could trigger inflation.
The positive economic indicators were also reflected in the market. The US 10-year Treasury yield surged to 1.67% after the GDP announcement. The Treasury yield had hovered around the 1.5% range recently after reaching the 1.7% level in March amid inflation concerns, but it turned upward this week alongside major economic data releases and the Fed’s decision to keep the benchmark interest rate unchanged.
Major indices on the New York Stock Exchange also started strong. The S&P 500 index rose 0.8% at the opening, setting an intraday record. The Nasdaq index also increased by 1%.
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