Gross Domestic Product Q1
The US’ gross domestic product increased at a 6.4% annualised rate in Q1, the first major increase seen in the first-quarter since 1984. Supported by consumer spending, first-quarter increased at a rate of 10.7% compared to the last fourth quarter, which was a rate of 2.3%.
Factors that Contributed to Q1 GDP Growth
Economic growth was greatly increased within the first 3 months of the year, as American’s received stimulus payments and welcomed reduced lockdown restrictions which encouraged consumer spending. Consumers spent greatly on goods as the economy continued to reopen. Personal expenditures grew at a 10.7% annualised pace. As data reported indicated to most consumers spending their stimulus payment, a large portion also saved their money, as the savings rate increased from 13% in the last quarter to 21%.
Usually, economic growth will increase the value of the dollar and stronger growth drives more spending and drives prices higher. As these prices increase, the Fed would usually step in and increase interest rates to prevent inflation. However, during these times, the Fed has maintained that interest rates will remain low which suggests that rising consumer prices could hamper the dollar.
Following the news of this year's Q1 data, Nowcast has increased their GDP forecast to grow by 5.3% for Q2, increasing by 0.7%. This change in forecast was brought forth by personal consumption and disposable income data. The USD continues to push higher after this report and was last seen gaining 0.7% on the day at 91.25.