US Economic Growth Expected To Accelerate In Q2

The US economic rebound picked up speed in the first quarter and even faster growth is expected for the April-through-June period, according to a set of GDP nowcasts.

Economic activity in 2021’s second quarter is on track to ramp up to a sizzling 10.5% increase in gross domestic product (real annual rate), based on the median nowcast for several estimates compiled by CapitalSpectator.com. That compares with the already strong 6.4% gain in Q1.  

It’s still early in current quarter and so the current Q2 nowcast should be viewed cautiously. A lot can happen between today and the end of July, when the Bureau of Economic Analysis publishes its preliminary estimate of GDP for Q2. For the moment, however, early estimates for growth point to an acceleration in economic rebound.

PMI survey data echoes the upbeat outlook for Q2. The IHS Markit Composite PMI Output Index, a proxy for GDP, rose sharply in April, reflecting the biggest upgrade in private-sector output in the history of this data set, which dates to 2007.

“Thanks to the cocktail of a successful vaccine roll-out, the reopening of the economy, ultra-accommodative monetary policy and injection of fresh fiscal stimulus, businesses are reporting the strongest surge in demand seen for at least a decade,” says Chris Williamson, chief business economist at IHS Markit. “The upswing in demand has led to one of the strongest months of job creation yet recorded by the survey as business prepares for better times ahead.”

A key reason for the improving outlook for growth: higher consumer spending, which was a leading factor in Q1’s stronger growth. Personal consumption expenditures rose sharply in the first quarter of the year, jumping 10.7%, dramatically above Q4’s 2.3% increase, the Bureau of Economic Analysis reports.

“Consumers are now back in the driver’s seat when it comes to economic activity, and that’s the way we like it,” says Gregory Daco, chief US economist at Oxford Economics. “A consumer that is feeling confident about the outlook will generally spend more freely.”

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Disclosures: None.

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