The United States economy recovered dashingly in the last quarter of 2021 due to increased consumer spending when COVID-19 cases lessened, and businesses restocked exhausted inventories.
Business reopenings and the growing vaccination rates triggered a stream of pent-up demand, helping the economy record its best year of growth since 1984.
According to the Commerce Department, the nation's gross domestic product (GDP), or the value of all goods and services produced in the United States, expanded at a seasonally adjusted annual rate of 6.9% in the October-December period. Bloomberg surveyed economists, who predicted a 5.3 percent increase in GDP, per USA Today.
The performance was after a 2.3% advance in the third quarter, a period when business activities were crippled by the surge in COVID-19 infections due to the delta variant, supply chain bottlenecks, soaring inflation, and depletion of the benefits from federal stimulus measures.
For the year, the US economy posted a growth of 5.7% and produced a record of 6.4 million jobs.
In 2020, the economy dropped off 3.4%, and 9.4 million jobs were lost as the COVID-19 pandemic forced businesses to shut down and heavily restricted the common activities of Americans.
However, the health crisis has made 2021 a challenging comeback year for the economy. The situation is projected to persist at least through the first half of the current year.
Consumer expenditure, which accounts for around 70% of economic activity, increased by 3.3 percent in the last three months of 2021, following a 2% increase in the previous quarter. When the delta cases spike subsided, Americans resumed dining out, traveling, and other activities. Many people also started their holiday shopping early to avoid supply shortages.
According to the Commerce Department, the GDP increased at an annual rate of 6.9% in the last quarter of 2021 partly due to strengthened exports and increased inventories, per the NPR report.
Increased Inventories and Consumer Spending Boost Economy
Since the first quarter of 2021, business stocks have started decreasing. During the pandemic, people's spending shifted from services to products that strained supply systems.
After adjusting for inflation, JPMorgan estimated that inventories expanded at a $167 billion rate in the last quarter.
Economists saw the fourth quarter of the year starting strong as consumer spending and investment numbers were doing great in all categories. Still, when the highly contagious omicron variant outbreak happened, the period ended poorly.
In December, the unemployment rate dropped to just 3.9%, which is the lowest level since the start of the pandemic. But there were, business companies had generated only 199,000 jobs.
US Economy Expected To Bounce Back
Forecasters expect the economic difficulties to continue into the beginning of 2022. Initial claims for unemployment benefits in recent weeks indicate some employers are cutting jobs in response to the omicron outbreak, per Reuters.
Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina, expects the economy to soldiers this year, with growth estimates as high as 3.9%. He and fellow economists see the economy growing this 2022 above its "natural speed limit" amid "still-solid demand, a need to replenish severely depleted inventory levels and manufacturers' obligation to meet record levels of backlogged orders."
