The U.S. economy notched its strongest growth in nearly four decades in 2021 after the government pumped trillions of dollars in COVID-19 relief, and is seen forging ahead despite headwinds from the pandemic, strained supply chains as well as inflation.
A surge in gross domestic product in the fourth quarter as businesses replenished depleted inventories to meet strong demand for goods was the final push. Last year's robust growth reported by the Commerce Department on Thursday supports the Federal Reserve's pivot towards raising interest rates in March. Fed Chair Jerome Powell told reporters on Wednesday after a two-day policy meeting that "the economy no longer needs sustained high levels of monetary policy support," and that "it will soon be appropriate to raise" rates. "While Omicron will lead to weaker growth in the first quarter, activity is expected to rebound nicely once the latest pandemic wave abates and supply-chain glitches ease," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "The Fed will need to be 'humble and nimble' as it navigates underlying economic strength, worsening labor shortages, and stubbornly high inflation." The economy grew 5.7% in 2021, the strongest since 1984, as the government provided nearly $6 trillion in pandemic relief. It contracted 3.4% in 2020, the biggest drop in 74 years. President Joe Biden quickly took credit for the stunning performance, which he said was "no accident." Read more...
