Report: U.S. Economy Up 6.4% in Q1

The U.S. economy grew at a 6.4% rate in the first three months of the year, The Associated Press reported Thursday.

The gains are setting the stage for what economists are forecasting could be the strongest year for the economy in seven decades.

Growth in the gross domestic product (GDP) was unchanged from the previous two estimates, according to The Commerce Department. The gain represented an acceleration from growth at a 4.3% rate in the fourth quarter.

The first-quarter spending gain reflected increases in goods purchases, led by auto sales, and gains in spending on services, led by food services and travel accommodations. Consumer spending grew at an annual rate of 11.4% in the first three months of the year, slightly up from the 11.3% growth estimate made a month ago. Consumers benefited from a round of stimulus payments which were included in the $1.9 trillion support package passed by Congress in March.

Economists believe GDP growth accelerated even more in the current April-June quarter due to increased vaccinations which have allowed for more business reopenings and consumer spending. Even economists whose forecasts for 2021 growth range from 6% to 7% believe growth this year will be the best since a 7.2% gain in 1984.

Additionally, economists are expecting growth in the current quarter to be enough to push GDP output above the previous peak set in the fourth quarter of 2019 prior to the pandemic. This would end the longest economic expansion in U.S. history.

Meanwhile, business investment grew at an 11.7% rate, while government spending increased at a 5.7% rate. The trade deficit also grew in the first quarter subtracting 1.5 percentage points from growth, as the recovering U.S. economy attracted rising imports while U.S. exporters struggled with weaker demand overseas.