The U.S. economy has rebounded in the wake of the Communist Party’s viral pandemic, thanks not only to the growing spending power of U.S. consumers, but also to a surge in investment spending by U.S. businesses, which has provided a boost to the economy.
Bloomberg reported on March 23 that economic growth depends on a combination of factors, primarily consumer spending, housing demand, government spending and investment. The next two quarters are expected to see a surge in U.S. household spending along with capital investment coming into play.
In the first half of 2020, U.S. non-residential fixed investment plummeted as did other sectors of the economy. These investments include investments in capacity expansion projects such as warehouses, distribution facilities, machinery, computers and software. In the second half of 2020, however, corporate spending soars, driven by investment in equipment.
Companies such as Alphabet Inc.’s Google, PepsiCo and retailer Urban Outfitters Inc. have increased investment spending as they seek to improve efficiency or adapt to changing consumer habits in the wake of the Communist Party’s viral outbreak, the report said.
Consumer spending, which once rose to a record high in the third quarter of last year, fell back in the fourth quarter, while nonresidential investment spending rose, outpacing consumer spending by the most since 2011 in percentage terms. More recent monthly data show that the growth momentum in business investment continues.
On Wednesday, the U.S. Commerce Department is expected to release durable financial data this week showing that core capital goods orders grew 0.5% in February.
The Wall Street Journal reported on March 16 that economists surveyed by The Wall Street Journal expect U.S. gross domestic product (GDP) to grow by 5.95 percent in 2021, up from a previous estimate of 4.87 percent. The Organization for Economic Cooperation and Development (OECD) also revised its forecast upward to 6.5 percent from last December’s estimate of 3.3 percent.
Both of these forecasts point to the strongest growth in the U.S. economy since 1984, according to the Bureau of Economic Analysis.
Economists say income transfers to households combined with a general environment of improving health will give a strong boost to consumer spending, which accounts for about 70 percent of U.S. economic growth.
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