Closing summary
Time to wrap up, with Reuters’ latest take on today’s strong US GDP report:
The U.S. economy notched its strongest growth in nearly four decades in 2021 after the government injected trillions of dollars in COVID-19 relief, and is seen soldiering on this year despite headwinds from the pandemic, strained supply chains as well as high inflation.
The Commerce Department’s report on Thursday showed the economy accelerating in the fourth quarter as businesses replenished depleted inventories to meet strong demand for goods. Last year’s robust growth supports the Federal Reserve’s pivot towards raising interest rates in March.
The sharp rebound in growth last year could offer some cheer for President Joe Biden whose popularity is falling amid a stalled domestic economic agenda after the U.S. Congress failed to pass his signature $1.75 trillion Build Back Better legislation. It, however, could diminish prospects of more money from the government. The government pumped nearly $6 trillion in pandemic relief.
“While Omicron will lead to weaker growth in the first quarter, activity is expected to rebound nicely once the latest pandemic wave abates and supply-chain glitches ease,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
“The Fed will need to be ‘humble and nimble’ as it navigates underlying economic strength, worsening labor shortages, and stubbornly high inflation.”
The economy grew 5.7% in 2021, the strongest since 1984. It contracted 3.4% in 2020, the biggest drop in 74 years. The stunning reversal came as gross domestic product increased at a 6.9% annualized rate in the fourth quarter. That followed a 2.3% growth pace in the third quarter.
The growth in US GDP of 5.7% for 2021 as a whole is the biggest since 1984. The quarterly distribution is below. #economy @CNBC #EconTwitter pic.twitter.com/WcUWx1twGP
— Mohamed A. El-Erian (@elerianm) January 27, 2022
Here’s today’s main stories too:
Here’s Danni Hewson, AJ Bell financial analyst, on the latest US growth figures, and the highlights from today’s financial results:
“And despite higher than forecast US GDP figures it’s impossible not to consider the factors that propelled the country to those heights. Firstly, we can’t forget where the country had been during the first Covid pummelling, secondly, all that stimulus lubricating the wheels is going to start to disappear which is why growth is forecast to slow considerably. And that’s the bit investors need to focus on, where economies are going and not just where they’ve been.
“And looking through some of today’s earnings updates both in the UK and the US, there’s good news and then there’s bad.
Mastercard’s profits were given a nice nudge thanks to the return of the traveller, a universal factor which also helped EasyJet which reported surging forward bookings. But cost pressures and supply issues are still continuing to dog businesses of all kinds. UK drinks maker Fevertree and US chip maker Intel Corp saw shares fall after both warned those lingering issues will impact profits in the near term.
“It’s something burger slinger McDonald’s has first-hand knowledge of, but as with all investments, there’s no one size fits all. Though shares fell after the market opened, they did recover slightly. Many of the factors which weighed down those golden arches have now been resolved and the buying power of the fast-food giant coupled with its brand loyalty and low-cost offer should put it on a better footing this quarter.
