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U.S. economy grew at 6.4 percent annual rate in first quarter as consumer spending drives robust recovery

It's the second-best quarterly reading since 2003.
Image: Kohl's Department Store
Consumer spending, which accounts for two-thirds of economic growth, increased by 10.7 percent in the first quarter.Dustin Chambers / Bloomberg via Getty Images

The reopening economy surged in President Joe Biden's first 100 days, with U.S. gross domestic product growth hitting 6.4 percent, the second best quarterly reading since 2003, after the pandemic rebound of the third quarter of last year.

Widespread vaccinations, warmer temperatures and stimulus checks powered the economy to grow by 1.6 percent in the first three months of 2021.

Consumer spending, which accounts for two-thirds of economic growth, increased by 10.7 percent in the first quarter, according to the advance estimates released Thursday from the Commerce Department. Spending on services saw a small recovery, expanding by 4.6 percent. In April, consumer confidence hit a 14-month high.

Economists had predicted an increase of 6.5 percent. U.S gross domestic product, or GDP, a measure of the total amount of goods and services produced, grew by 1.1 percent in the last quarter of 2020, for an annualized pace of 4.3 percent.

GDP hit a historic low in 2020, falling by a record 31.4 percent in the second quarter as the economy shut down, stores and businesses closed their doors and workers stayed home to avoid spreading the virus.

Since then, around 14 million people have returned to work and the unemployment rate — which peaked at 14.8 percent last spring — has now fallen to 6 percent.

But the rate of growth may taper as businesses, which cut back to survive the pandemic shutdowns, must now scramble with diminished resources and supply chain breakdowns to pivot and build back to capture the soaring demand.

Business owners complain of worker shortages and some have suggested that federal benefits are keeping workers on the sidelines. Workers, meanwhile, complain that the available jobs are too rudimentary, exposed to front-line risks, and offer too little pay. As the situation works itself out, experts advise consumers to gird themselves for slower deliveries and service, and higher prices.

CORRECTION (April 29, 2021, 6:36 p.m. ET): A previous version of this article incorrectly identified the first quarter GDP growth as the best since 2003. It was the second-best, after the pandemic reopening and rebound of the third quarter of 2020.