As the first quarter of the year comes to a close, the US continues to see strong signs of economic recovery from COVID-19. The growth has been driven by significant surges in consumer spending and wage growth in the first quarter.
In March, consumer spending rebounded after the distribution of the White House's $1.9 trillion fiscal stimulus, and this increase is expected to contribute to further accelerated recovery in the upcoming second quarter. Labor costs also spiked due to a labor squeeze caused by companies’ attempts to increase production and high unemployment benefits which could make the return to work an unattractive proposition for low wage employees.
Personal incomes rose by 21.1% from February, beating expectations by 0.8% and showing a distinct reversal from last month's 7% decline. Savings rates also surged to 27.6% in March, which should drive consumption and GDP towards double-digit growth in Q2.
As COVID-19 vaccines continue to roll out and restrictions diminish, these overall optimistic results from the first quarter are projected to contribute to strong economic growth. However, inflation remains a persistent threat.