An improved public health outlook linked to mass vaccinations and a flood of fiscal aid coursing through the American economy boosted gross domestic product by 6.4% during the first three months of the year.
The composition of growth was rock solid to kick off the year as American households increased spending by 10.7%, setting the stage for the return of economic activity to pre-pandemic levels in the current quarter—an extraordinary policy achievement.
Net exports and gross private domestic investment each subtracted 0.87 percentage points from growth as changing inventories dragged down the top-line number by 2.64 percentage points. It is clear that as the recovery improves, firms release pent-up demand for investment and inventory accumulation rises, there is room for the economy to accelerate into the second quarter.
The primary policy takeaway from this report is to stay the course. It is essential that the fiscal and monetary authorities follow through on current policy paths for the economy to return to full employment, which we expect in the second half of next year.