What is GDP? According to the Bureau of Economic Analysis, GDP stands for Gross Domestic Product and is an index that represents the market value of goods and services produced by labor and property in the United States. Essentially, it’s an index that measures economic growth.
Last week the first reading of the GDP was released for the first quarter, January through March, and it increased at an annual rate of 6.4%. This number was for the most part in line with the consensus and was very strong. Estimates were high for this reading due to all of the stimulus that the government has been extending. The stimulus included direct economic impact payments and expanded unemployment benefits. In addition, Paycheck Protection Program (PPP) loans were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.
Even though this GDP report was a very strong one, keep your eyes peeled and get ready for the second quarter release as the economy is beginning to come back. The Q2 report will be on the heels of a $1.9 trillion stimulus plan that was extended in March.
Mark Zandi, Chief Economist at Moody’s Analytics reacted to the GDP saying, “This signals the economy is off and running and it will be a boom-like year.” He added, “Obviously, the American consumer is powering the train and businesses are investing strongly.”