US: GDP records a 6.4% growth in 1Q21

According to the data published today, the US GDP growth was announced as 6.4% in 1Q21. As such, growth accelerated from the 4.3% level in 4Q20. Of course, there is also a hormone effect that occurs with the incentives that intervene in the acceleration. The reflection of this is seen on the side of personal consumption expenditures. We also saw this acceleration effect in high frequency data at the beginning of the year. Increase in real GDP; reflecting mainly increases in personal consumption expenditures (PCE), non-residential fixed investment, federal government spending, fixed housing investment, and state and local government spending; partially offset by exports as well as decreases in private inventory investments.

The 10.7% increase in PCE reflected increases in durable goods (motor vehicles and parts), nondurable goods (led by food and beverages) and services (led by food services and accommodation). In non-residential fixed investments, we see the contribution of information technology (equipment) and intellectual property (software). The increase in federal government spending is primarily related to payments to banks for processing and managing Pay Check Protection Program loan applications, as well as the purchase of COVID-19 vaccines for distribution to the public. The increase effect in retail trade explains the decrease effect experienced in stocks.

Disposable personal income increased by 2.36 trillion USD numerically and 67% proportionally in 1Q21. This increase is 61.3% in real disposable income, which is adjusted from inflation effect. The hormonal effect created by pandemic aids and incentives should also be taken into account, while comparing with the nominal 8.8% and real 10.1% decrease in 4Q20. That's why the numbers for 1Q21 are so high. Savings rose to 4.12 trillion USD in 1Q21. The impact of pandemic benefits helped individuals to put their savings back, with the savings rate rising from 13% in 4Q20 to 21% in 1Q21. With the advancement of vaccination and the opening of businesses, more people returning to work will also maket he increase in disposable income more organic. The forecast for 2Q21 is also positive as the economy is doing well. We will look at how much and in what form Biden's packages will be accepted and implemented by the Senate. New York City has announced a transition plan to full opening in July, good news. If the economy can maintain this outlook, it could reach a "package free" growth point earlier than expected.

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