Now that the economy is ready for the best growth since 1983, inflation lurks

Ronald Reagan was in the White House, “Return of the Jedi” was in theaters and economic growth hit an astonishing 7.9%.

The US has produced a lot more Star Wars movies since 1983, but the growth has never reached that level – until this year, if economists are right. Respondents from The Wall Street Journal raised their average forecast for economic growth for 2021 to 6.4%, measured as the change in inflation-adjusted gross domestic product in the fourth quarter from a year earlier. If realized, that would be one of the few times in 70 years that the economy has grown so fast.

“We had an unbelievable shock, but look how fast we bounce back,” said Allen Sinai, chief global economist and strategist at Decision Economics Inc. five years to go. I think we are in a boom. “

Economists expect growth to slow to 3.2% next year, making 2021-22 still the strongest two-year performance since 2005.

That boom could have a potentially troubling side effect. Inflation, as measured by the consumer price index, is expected to rise sharply from 1.7% in February when March data is released Tuesday. That’s partly an oddity of the data, as the outright declines in consumer prices recorded at the start of the pandemic in March last year are slowing down from the 12-month calculation.

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