GDP grew at a 6.9% pace to close out 2021, stronger than expected despite omicron spread

To end 2021, the U.S. economy experienced a faster than expected growth rate. This was despite the fact that there were signs of a slowdown towards the end.

Gross domestic product, the sum of all goods and services produced during the October-through-December period, increased at a 6.9% annualized pace, the Commerce Department reported Thursday. Dow Jones polled economists looking to see a 5.5% gain.

It was well over the unrevised 2.3% increase for the third quarter. This came in spite of a spike in Covid Omicron cases, which likely slows down hiring as companies deal with many sick employees.

These gains were due to increases in private inventor investment and strong consumer activity, as shown in personal consumption expenditures, exports and business spending, as measured by nonresidential fix investment.

All-around decreases in GDP’s pace due to government spending and imports which were a drag on production.

A 2021 quarter ended with a 5.7% annualized GDP increase, which was the fastest pace since 1984. It came as the U.S. sought to rebound from an unprecedented decline in activity that occurred in the beginning of the 21st century. the coronavirus pandemic.

The news was received positively by the markets, stock futures posting gainsWhile government bond yields were mixed.

Jim Baird is chief investment officer of Plante Moran Financial Advisors. “The strength and resilience of the economy in the last year was in sharp contrast to that of early 2020. It also speaks to both the private and public sector’s ability to quickly adapt to the unprecedented challenges created in the pandemic,” he said. However, there are still potential headwinds as global risks associated to the COVID-19 pandemic.

Other economic news on Thursday jobless claims totaled 260,000The week ended January 22 was somewhat lower than the 265,000 estimation and saw a drop of 30,000 over the previous week.

The Port of Los Angeles will open its doors to cargo trucks on Wednesday, October 13, 2021, in San Pedro.
Getty Images| Los Angeles Times | Getty Images

The December order for durable goods fell 0.9%, which is worse than an estimate of a 0.6% decline. Orders for durablesThey reached their lowest level since April 2020. It was due to an end-of-2018 slowdown, as the number of omicron cases soared. This was due to a 3.9% decline in transport orders.

However, the GDP report showed a solid economy overall, even though output was down significantly in the summer. The economic picture was impacted by supply chain problems caused by the pandemic and strong demand resulting from unprecedented stimuli provided Congress and Federal Reserve.

The quarter saw 3.3% growth in consumer activity. This is more than half of the GDP. As a measurement of the amount that businesses spend and how much inventory is built, gross domestic investment rose 32%.

According to the Bureau of Economic Analysis, inventories increased by 4.9 percent in headline growth. This was mainly due to motor vehicle dealers.

Influence on policies

As supply was unable to keep pace with high demand in 2021 (especially for goods and services), economic growth occurred.

As the U.S. enters 2022, it is uncertain how the country will fare. Fed Chairman Jerome Powell warned Wednesday that while growth may slow in the beginning of the year, Powell still considers the economy strong overall.

In response, the Fed announced a march interest rate rise, its first since 2018. Also, central bankers anticipate that their monthly asset purchases will be ended the same month. They also plan to begin disbursing their bonds shortly thereafter.

The tightening of the belt is in response inflation at its highest point in almost 40 years. Friday’s data on the Fed’s preferred inflation gauge (the personal consumption expenditures price indicator) will be available.

These price pressures were also evident in fourth-quarter data. The price index for domestic gross purchases increased 6.9% in fourth quarter, and 3.9% overall for the year. While 2% is considered healthy inflation according to the Fed’s policy, 2020 will allow for higher levels for a shorter time period in the interests of creating full employment.

Powell indicated Wednesday that Fed officials believed they had achieved both ends in their employment/inflation mandate. They are prepared to increase rates or otherwise tighten their monetary policies.

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