The economy has been through a lot these last two years. The coronavirus has caused an increase in inflation and a decrease in GDP (Gross Domestic Product). Therefore, we would have expected another decline in GDP after the appearance of the new COVID-19 variant, Omicron, at the end of 2021. This new variant caused a lot of new COVID cases and could have hurt the economy. However, according to the Commerce Department, the GDP increased at a 6.9% annualized pace from October to December of 2021. This is even more than economist Dow Jones had been looking for, namely an increase of 5.5%. The 6.9% growth is a big improvement from the unrevised 2.3% growth in the third quarter of that year. But what caused this economic growth? The growth is caused by an increase in all the following sectors: private inventory investment, personal consumption, export, and business spending. Ass well as that import increased in the last quarter, which made the net export increase. In these three months, the personal consumption increased by 3.3% and the business spending and inventory investment increased by 32%. This last quarter of 2021 contributed to a 5.7% increase in annualized GDP of 2021. This is the highest pace since 1984.
https://www.cnbc.com/2022/01/27/gdp-grew-at-a-6point9percent-pace-to-close-out-2021-stronger-than-expected-despite-omicron-spread.html
Monday, January 31, 2022
Economic Growth Despite Omicron
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I find it interesting to see such a high growth in GDP during the end of 2021. I think most of this can be attributed to high spending and consumption of income during the holidays. Inflation is also a concern, it will be interesting to see how GDP is effected as the Fed looks to counter inflation.
ReplyDeleteWith the factors that you listed, it seems like both households and businesses used the last quarter to raise spending since the pandemic. Although the Omicron variant was apparent, it seems that people's attitudes were focused on preparing for the future as uncertainty is at an all time high.
ReplyDeleteIt cool to see the increase of GDP at the end of 2021. But you can't forget the inflation rate is still very high. But there are always plus sides like how unemployment is more under control and decreasing.
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