MACRO: US Personal consumption surges in Q1 2021

• US Q1 GDP below forecasts
• Weekly jobless claims drop to a new post-pandemic low

The US economy grew by an annualized 6.4% in the first quarter, following a 4.3% increase in the previous period, however today's reading came in below market estimates of 6.5% even though US citizens received the so-called Biden's checks. GDP growth spanned a number of areas, including increased residential and non-residential fixed investment, and government spending. Core personal consumer expenditures, the favored measure of inflation at the Federal Reserve, rose to 2.3%  year-on-year from 1.3% in the previous month and slightly below consensus estimates of 2.4%. Declines were seen in inventories and exports, while import increased.  

Compilation of individual components of the GDP reading for the first quarter. Source: Twitter

However, the most surprising point of the report is certainly the fact that personal consumption increased by 10.7% in Q1 after an increase of 2.3% in the previous quarter and accounted for over 100% of final GDP print.

Personal consumption soared sharply in Q1. Source: Bloomberg via ZeroHedge.

Today's reading is another one that confirms the rapidly rising inflation. Prices of goods and services purchased by Americans rose 3.8% in the Q1of 2021 after increasing 1.7% in the Q4 of 2020 due to sharp increase in personal spending. Energy prices increased 46.7% in the first quarter while food prices decreased 0.1% . Excluding food and energy, prices increased 3.1%  in the last quarter after increasing 1.6 % in the final quarter of 2020. 

Meanwhile a report from the Labor Department showed that another 553k US citizens filed first-time jobless claims compared to upwardly revised 566k in the previous week. That marked another pandemic-era low but was above analysts’ expectations of 549k. However, the total number of Americans still on some form of government jobless benefit remains above 16.5 million.

Number of Americans on jobless benefits still remains high. Source: Bloomberg via ZeroHedge.

One can get the impression that the protracted recovery in the labor market is partly desired by the FED, as it is one of the factors justifying maintaining the existing accommodative monetary policy even despite the visible signs of rising inflation.