ICYMI: U.S. Economy Grew 5.7% in 2021, Fastest Growth Since Reagan Administration

"U.S. economy bounced back sharply…" "Best showing since 1984…" "Dramatically outpaced forecasts…"

Today's GDP data shows that the U.S. economy grew 5.7% from 2020 to 2021, after adjusting for inflation. This historic recovery was no accident, and is thanks in part to our vaccination strategy and the American Rescue Plan. In addition, retailers re-stocked their inventories as we addressed supply chains snarls and helped goods move faster from ship to shelf in time for the holiday season. Economic growth in 2021 exceeded even the most optimistic forecast. The Biden Administration remains committed to continued robust and inclusive economic growth, in addition to easing inflationary pressures and supply chain challenges.

See below for excerpts from the coverage:

Wall Street Journal: America's Economy: Stocking Up and Looking Up
[Justin Lahart, 1/27/22]

The Commerce Department on Thursday reported that, adjusted for inflation, gross domestic product grew at a 6.9% annual rate in the fourth quarter. That was significantly stronger than the third quarter's 2.3% and ahead of the 5.5% economists had penciled in.
Part of why GDP picked up was that Americans spent more, with consumer spending growing at a 3.3% rate in the fourth quarter versus 2% in the third. But the most important factor behind the GDP gain was an increase in inventories, which contributed 4.9 percentage points to growth.

[T]here is reason to believe that, just as an increase in inventories added to fourth-quarter GDP, inventory accumulation will continue to contribute to economic growth over the course of this year.

[T]he message in Thursday's GDP report is that this year companies might find it easier to keep their shelves stocked than last—a development that could both boost growth while relieving shortage-related price pressures. That counts as good news.

USA Today: Economy grew 5.7% last year, its best showing since 1984, as activity revived amid pandemic
[Paul Davidson, 1/27/22]

The U.S. economy bounced back sharply in the fourth quarter as consumers splurged again after a summer spike in COVID-19 cases eased and businesses replenished depleted inventories.

The rebound helped the economy turn in its strongest year of growth since 1984 as business reopenings and rising vaccinations unleashed a well of pent-up demand.

Consumer spending, which makes up about 70% of economic activity, rose 3.3% the last three months of the year, following a 2% advance the prior quarter. Americans resumed dining out, traveling and other activities early in the quarter after the delta spike abated.

… [O]micron cases falling as quickly as they rose … should set the stage for another solid year of growth in 2022, barring the effects of additional variants. Growth is set to slow to about 4%, the Federal Reserve predicts … But that would still mark a healthy gain, especially compared to average yearly growth of about 2.2% in the decade before the pandemic.

The addition to inventories made up the bulk of last quarter's growth, adding nearly 5 percentage points.

Bloomberg: U.S. Economic Growth Quickened Last Year With Inventory Boost
[Reade Pickert, 1/27/22]

U.S. economic growth accelerated by more than forecast in the fourth quarter, fueled by the rebuilding of inventories and capping the strongest year since the 1980s.

The highly-contagious omicron variant has stifled economic growth in the near-term as record levels of infections keep many Americans at home, denting demand and further disrupting supply chains. Looking beyond the first quarter though, many economists expect solid growth this year amid expectations of an easing in inflationary pressures and supply-chain challenges.

[T]he economy grew 5.7% in 2021 from the prior year on an inflation-adjusted basis, the most since 1984. Consumer spending jumped 7.9%, the most since 1946.

Services spending added 2.1 percentage points to GDP, while goods added 0.1 percentage point.

New York Times: U.S. Economy Grew 1.7% in 4th Quarter, Capping a Strong Year
[Talmon Joseph Smith, 1/27/22]

Continuing to rebound from the shocks of the pandemic, the nation's economy expanded by 1.7 percent in the final three months of 2021, the Commerce Department announced Thursday.

The figure, which was adjusted for inflation, reflects the growth in gross domestic product — the broadest measure of the goods and services produced. On an annualized basis, the increase for the quarter was 6.9 percent.

The strong fourth-quarter growth was driven in part by consumer spending, which "primarily reflected an increase in services, led by health care, recreation and transportation," the Commerce Department said. Private investment and an increase in inventories were also major factors.
"This is really strong data," said Jane Oates, an assistant labor secretary during the Obama administration and the president of Working Nation, a nonprofit group focused on employment issues. The inventory increase, she said, "shows at least incremental improvement in supply chains."
Consumer spending and private investment were revived after the pandemic's initial blow as a result of vaccination efforts, cheap credit conditions and additional rounds of federal aid to households and businesses. The labor market has recovered almost 19 million of the 22 million jobs lost near the peak of virus-induced suspensions in activity.
"Fiscal and monetary policy committed to supporting the economy aggressively during the pandemic, and it worked," said Julia Coronado, a former Federal Reserve economist and a professor of finance at the University of Texas at Austin. "Not only did we meet the goal of shortening the recession," she said, "we exceeded all expectations" on the speed of re-employment.

The average business owner "sees a very strong environment right now," said Oren Klachkin, the lead economist for U.S. industry and regional research at Oxford Economics. "They want to ramp up investment because they want to meet that demand — and they have every reason to invest."

Wall Street Journal: U.S. Economy Grows as Fourth-Quarter GDP Shows Strongest Year in Decades
[Josh Mitchell, 1/27/22]

Output grew 5.5% in all of 2021, when comparing the fourth quarter to the same period a year earlier. The economy hasn't grown that fast since 1984, during President Ronald Reagan's first term, when the country was rebounding from a double-dip recession and an era of high inflation.

"The U.S. has learned to adapt to the new world of variants and continues to produce," said Beth Ann Bovino, chief U.S. economist at S&P Global Ratings.

Most economists think U.S. output will grow modestly this year. Americans still have higher savings compared to before the pandemic, and jobs are plentiful. "Household balance sheets look to be the healthiest basically since we've been tracking this data" starting in the 1980s, Dr. Bovino of S&P Global Ratings said.

Washington Post: U.S. economy grew 5.7 percent in 2021, fastest full-year clip since 1984, despite ongoing pandemic
[Rachel Siegel and Andrew Van Dam, 1/27/22]

The U.S. economy grew by 5.7 percent in 2021, the fastest full-year clip since 1984, roaring back in the pandemic's second year despite two new virus variants that rocked the country.

Earlier in 2021, economists worried that global supply chain problems would keep businesses from being able to fully stock shelves. But a rush by companies in the final months of 2021 to bolster their inventories ultimately drove GDP much higher.

NBC News: U.S. economy grew by 5.7 percent last year, fastest pace since 1984
[Ben Popken, 1/27/22]

The U.S. economy grew last year at its fastest pace since 1984, rebounding from a sharp but brief coronavirus-induced recession in March 2020.

The nation's gross domestic product, a measure of all goods and services produced, expanded by 5.7 percent in 2021, the Commerce Department reported Thursday. Growth accelerated even faster during the period from October to December, rising to 6.9 percent on annualized basis.

CNBC: GDP grew at a 6.9% pace to close out 2021, stronger than expected despite omicron spread
[Jeff Cox, 1/27/22]

Gross domestic product, the sum of all goods and services produced during the October-through-December period, increased at a 6.9% annualized pace, the Commerce Department reported Thursday. Economists surveyed by Dow Jones had been looking for a gain of 5.5%.

Markets reacted positively to the news, with stock futures posting gains while government bond yields were mixed.

"The strength of the economy last year stood in stark contrast to the collapse in activity in early 2020, but also speaks to the success of both the public and private sector in quickly adapting to the unprecedented challenges created by the pandemic," said Jim Baird, chief investment officer at Plante Moran Financial Advisors.

The GDP report … reflected an overall solid period for the economy after output had slowed considerably over the summer. Supply chain issues tied to the pandemic coupled with robust demand spurred by unprecedented stimulus from Congress and the Federal Reserve led to imbalances across the economic spectrum.

Consumer activity, which accounts for more than two-thirds of GDP, rose 3.3% for the quarter. Gross private domestic investment, a gauge of business spending and inventory build, soared 32%.

Inventories added 4.9 percentage points to the headline growth, boosted in particular by motor vehicle dealers, the Bureau of Economic Analysis said.