Washington, Jan. 27 (BNA): The US economy grew last year at the fastest pace since Ronald Reagan’s presidency, rebounding flexibly from the short and devastating coronavirus recession of 2020, according to the Associated Press.
A state’s gross domestic product — its total production of goods and services — expanded by 5.7% in 2021. It was the strongest growth in a calendar year since a 7.2% rise in 1984 after an earlier recession.
The overall economy finished growing at a solid annual pace of 6.9% from October through December, the Commerce Department reported Thursday.
The economy is expected to continue expanding this year, albeit at a slower pace.
Several economists have lowered their forecasts for the current January-March quarter, reflecting the impact of the Omicron variable. For the entire year of 2022, the International Monetary Fund has forecast that the country’s GDP growth will slow to 4% for 2022.
Many American businesses, especially restaurants, bars, hotels and entertainment venues, are still under pressure from the omicron type, which has kept millions of people confined to the home to avoid crowding.
Consumer spending, the main driver of the economy, may swing further this year due to the loss of government assistance to households, which boosted activity in 2020 and 2021 but essentially ended.
Moreover, the Federal Reserve made it clear on Wednesday that it plans to raise interest rates several times this year to fight the hottest inflation in nearly four decades. These interest rate increases will make borrowing more expensive and may slow the economy this year.
Due to the pandemic recession of 2020, a healthy recovery was expected in 2021. GDP contracted 3.4% in 2020, the largest decline for the whole year since its 11.6% decline in 1946, when the nation was on layoffs after the war Second World.
The COVID outbreak in March 2020, led to authorities ordering businesses to close, abruptly close or reduce working hours. Employers cut a staggering 22 million jobs. The economy sank into a deep recession.
But ultra-low interest rates, massive infusions of government aid — including $1,400 checks for most families — and, in the end, the widespread introduction of vaccines revived the economy. Many consumers have regained confidence and money to go out and spend again.
In fact, the return of demand was so strong that it surprised companies. Many struggled to get enough supplies and personnel to meet the rapid increase in customer orders.
With so many people now working remotely, shortages are especially acute in goods needed for homes, from appliances to sporting goods to electronic equipment.
With the supply of computer chips in particular in short supply, car dealers were severely short of cars.
Factories, ports, and shipping yards were crowded, and supply chains became entangled. Inflation began to accelerate. Over the past 12 months, consumer prices have risen by 7% – the fastest annual rate of inflation since 1982. Food, energy, and automobiles are among the items that have risen in price the most.
Late last year, the economy began showing signs of fatigue. Retail sales, for example, fell 1.9% in December. Manufacturing in December slowed to an 11-month low, according to the Institute for Supply Management’s Manufacturing Index.
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