The US economy recovered nicely from a dismal 2020 where containment measures drove the economy into a recession. Overall, 2021 was a good year, with the economy growing by 5.7%. Early in the year, record increases in consumer spending fueled the economy. In many cases, suppliers could not keep pace with demand. So they stepped up production and increased inventory in the second half of the year. Gross private investment contributed the most to the fourth quarter's jump in RGDP. Unfortunately, the increase in demand and supply shortages pushed the inflation rate to be more than three times higher than all of 2020. But what is most alarming was how much the annual rate increased at the end of the year. The surge in prices more than offset the increase in disposable personal income. Real disposable income decreased in both the third and fourth quarters.
Economists expect the Omicron variant to cool the economy in the first quarter of 2022. A record number of COVID cases create staffing problems, and many businesses have again had to cut back. Demand for many services has fallen as consumers once again curtail their activities. Readers can access the full report at Gross Domestic Product, Advance Estimate Fourth Quarter 2021.
The BEA will release Personal Income and Outlays, December2021 on Friday, January 28. Check back to HigherRockEducation.org Friday afternoon or Saturday for our summary and analysis.