US economy grew 5.7 percent in 2021, but Omicron hit looms
The world’s largest economy staged a solid recovery last year as it grew at the fastest pace since 1984, but damage from the Omicron variant of COVID-19 is imminent.
The U.S. gross domestic product - its total output of goods and services - expanded 5.7 percent in 2021. The economy ended the year by growing at an unexpectedly brisk 6.9 percent annual pace from October through December as businesses replenished their inventories, the Commerce Department reported on Jan. 27.
Surging prices continue to pose a challenge, as inflation picked up speed in the final three months of the pandemic’s second year, according to official data. That threatens to dampen the consumer demand that has underpinned the recovery, while shortages and supply chain snarls continue to create headaches for businesses.
“The upside surprise came largely from a surge in inventories and the details aren’t as strong as the headline would suggest,” said Kathy Bostjancic of Oxford Economics. “Beneath the headline GDP print, the handoff to 2022 is weak, with consumer spending retrenching in December and Omicron dampening economic activity,” she said in an analysis.
Prices accelerated during the year, peaking in the October-December period with a 6.5 percent surge in the personal consumption expenditures (PCE) price index. That was the biggest increase in 40 years.
For the full year, inflation rose 3.9 percent, still far above the Fed’s 2 percent goal. Excluding volatile food and energy prices which have increased sharply in the year, the core PCE price index rose 3.3 percent in 2021, and 4.9 percent in the fourth quarter.
The Federal Reserve on Jan. 26 issued a clear signal that it plans to begin raising interest rates in March to tamp down inflation, but that also could restrain growth next year.