The Case for Continued Economic Growth – February 18, 2021

U.S. Gross Domestic Product (GDP) is the largest measure of economic activity.

• It expanded at a record 33.4% annualized pace in Q3 and a slower but still-healthy 4.0% in Q4, per the U.S. BEA.

Most data suggest the economy is still growing, but uncertainty regarding the path of the virus, new variants, and the rollout of the vaccines are keeping economic forecasters off balance.

Yet, there is plenty of money in the economy that could drive growth.

Thanks mostly to government-provided cash, the savings rate has been elevated since the pandemic began.

• In December, the savings rate rose to 13.7% from November’s 12.9%.
• The average rate since 1959: 8.9%.
• The average rate since 2000: 6.5%.

Source: St. Louis Federal Reserve

Investor’s corner

Whether obtained through loans or cash in the bank, money drives spending, which drives economic activity.

Cash has flowed into some sectors of the economy, helping to bolster growth, while social distancing restrictions have hurt other industries.

While risks remain and economic outlook is murky, the high savings rate and the potential for new economic stimulus could lend additional support to the economy amid the uncertainty caused by the pandemic.

Created 2021-02-18 15:44:30