- U.S. real GDP grew at an annualized rate of 6.4% in the first quarter of 2021
- The Federal Reserve decided to keep the federal-funds rate between 0 - 0.25%
- The Conference Confidence rose to 121.7 in April from a 109.7 in March
Top Three Market Headlines
U.S. GDP Surges in Q1: The Bureau of Economic Analysis (BEA) reported last week that U.S. real (inflation-adjusted) gross domestic product (GDP), a measure of all goods and services produced, expanded at a seasonally-adjusted annual rate (SAAR) of 6.4% in the first quarter of 2021. This was an increase from 4.3% in Q4 of 2020, and reflected “the continued economic recovery, reopening of establishments, and continued government response related to the COVID-19 pandemic,” according to the BEA’s report. A bulk of the increase came from consumer spending, which grew at an annualized pace of 10.7%. The price index for gross domestic purchases increased at a SAAR of 3.8% in Q1, more than double last quarter’s reading of 1.7%. The 6.4% increase leaves our nation’s economy only 1% away from the peak reached in late 2019.
Federal Reserve Holds Steady: The Federal Reserve’s policy-setting committee met last week and decided to keep the federal-funds rate near zero and maintain its current bond-buying pace of $120 billion per month. While noting that indicators of economic activity and employment have strengthened, Chairman Jerome Powell said “(t)he economy is a long way from our goals,“ and that the Fed intends to maintain an accommodative stance until its target outcomes for labor market conditions (maximum employment) and inflation (moderately above 2% for some time) are achieved. Regarding the latter, the Fed acknowledged that inflation has risen, but reiterated its belief that the increase thus far is largely due to transitory factors.
Consumer Confidence Jumps: Consumers’ optimism about the U.S. economy expanded sharply in April amid increasing vaccinations and continued loosening of pandemic restrictions. The Conference Board reported last week that its Consumer Confidence Index rose to 121.7 in April from 109.7 in March. This was the fourth straight monthly increase and the index’s highest level since February 2020. Showing particular strength, the Present Situations Index, a measure of current business and labor conditions, surged to 136.9 in April from 110.1 in March.