Data released Thursday showed real GDP grew 6.4% during the first quarter. Wells Fargo analysts explain that not only was overall GDP growth supported by strong growth in consumer spending, but spending on investment in fixed assets also grew at a steady pace. They expect growth to remain robust.
“After falling by about 10% between Q4 2019 and Q2 2020, real GDP is now just 0.9% below its pre-pandemic peak.”
“The notable increase in total GDP was largely driven by real personal consumption expenditure (PCE), which jumped 10.7%. Not only did consumer spending on goods remain very high — purchases of durable and non-durable goods rose 41.4% and 14.4%, respectively — but spending on services also rose 4.6%. ”
“But the strength of overall GDP was not limited to real PCEs, as fixed investment spending rose 10.1% year-on-year in the first quarter. As a result, enterprises’ expenditures on equipment increased by 16.7%, while expenditures on intellectual property – by 10.1%. The strong growth in these areas reflects, at least in part, the hardware and software upgrades needed to support telecommuters. ”
“Overall GDP growth could have been even higher 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, thanks in large part to deferred demand for many services and the huge amount of excess savings accumulated by many households. Indeed, 2021 is likely to be the strongest year for US real GDP growth in nearly 40 years. ”
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