The U.S. economy grew by almost 6 percent in 2021 as the country staged a rapid rebound from the blow of the coronavirus pandemic, according to data released Thursday by the Commerce Department.
U.S. gross domestic product grew 5.7 percent last year after falling 3.4 percent in 2020 as the onset of COVID-19 derailed the global economy and wiped out 21 million domestic jobs, according to the Bureau of Economic Analysis.
Growth also accelerated during the last quarter of the year, hitting an annualized pace of 6.9 percent even as high inflation strained consumers and businesses. That means the U.S. economy would have grown almost 7 percent if the fourth-quarter pace of growth lasted an entire year.
Economists credit the combination of unprecedented fiscal and monetary aid and the quick development of COVID-19 vaccines for the economy’s swift bounceback from the steepest decline since the Great Depression.
The U.S. had recovered all but roughly 600,000 of the jobs lost to the onset of the pandemic by December, according to Labor Department data released this month, wage growth accelerated sharply, and consumer spending ran well above pre-pandemic levels.
The BEA said increases in consumer spending and investments in business equipment led most of the year’s economic growth. Personal consumption expenditures rose 7.9 percent in 2021, with goods purchases spiking 12.1 percent and spending on services rising 5.9 percent.
Exports rose 4.6 percent in 2021, but imports—which detract from GDP—rose 14 percent last year.
While consumer spending rebounded in 2021, it was heavily concentrated on goods rather than services where COVID-19 exposure could be higher. The glut of demand for goods and the ongoing supply shortages and staffing issues driven by the pandemic helped drive consumer prices up 7 percent last year, according to the Labor Department’s consumer price index, the highest rate of inflation in roughly 40 years.
Much of the fourth-quarter surge in GDP came from a jump in inventory investment by businesses, a potential sign of progress toward unsnarling supply chains.
“This likely reflects the ongoing challenges so many sectors of the economy have had with supply-chain constraints. Some companies may move to higher steady state inventory levels going forward to prevent the disruption that supply-chain issues have caused, and this ongoing restocking behavior could continue to lead to above trend growth in 2022, wrote Mike Fratantoni, chief economist for the Mortgage Bankers Association.
Updated at 11:08 a.m.