The US economy grew solidly in the second quarter, pulling the level of gross domestic product above its pre-pandemic peak, as massive government aid and vaccinations against Covid-19 fuelled spending on goods and travel-related services.
The pace of GDP growth reported by the Commerce Department on Thursday was, however, slower than economists had expected.
That was because businesses had to again draw down on meagre inventories to meet the robust demand.
Supply constraints, which have resulted in shortages of motor vehicles and some household appliances, are making it harder for business to replenish stocks.
“The US economy is off and running,” said Scott Hoyt, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.”Real GDP has fully recovered what it lost in the downturn.”
Gross domestic product increased at a 6.5% annualised rate last quarter, the government said in its advance estimate of second-quarter GDP.
The economy grew at a 6.3% rate in the first quarter, revised down from the previously reported 6.4% pace.
Economists polled by Reuters had forecast GDP rising at an 8.5% rate last quarter.
Excluding inventories, trade and government spending, the economy grew at a 9.9% pace.
With the second-quarter estimate, the government published revisions to GDP Data, which showed the economy contracting 3.4% in 2020, instead of 3.5% as previously estimated.
That was still the biggest drop in GDP since 1946.
The revisions to growth in other years and quarters were minor.
From 2015 to 2020, GDP increased at an average annual rate of 1.1%, unrevised from previously published estimates.
The National Bureau of Economic Research, the arbiter of US recessions, declared last week that the pandemic Downturn, which started in February 2020, ended in April 2020.
Even with the second quarter marking the peak in growth this cycle, the economic expansion is expected to remain solid for the remainder of this year.
A resurgence in Covid-19 infections, driven by the delta variant of the coronavirus, however, poses a risk to the outlook.
Higher inflation, if sustained, as well as ongoing supply chain disruptions could also slow the economy.
The Federal Reserve on Wednesday kept its overnight benchmark interest rate near zero and left its bond-buying programme unchanged.
Fed Chair Jerome Powell told reporters that the pandemic’s economic effects continued to diminish, but risks to the outlook remain.
US stocks opened higher.
The dollar fell against a basket of currencies.
US Treasury prices were lower. Economists expect growth of around 7% this year, which would be the strongest performance since 1984.
The International Monetary Fund on Tuesday boosted its growth forecasts for the United States to 7.0% in 2021 and 4.9% in 2022, up 0.6 and 1.4 percentage points respectively, from the forecasts in April.
President Joe Biden’s administration provided $1.9tn in pandemic relief in March, sending one-time $1,400 checks to qualified households and extending a $300 unemployment subsidy through early September.
That brought the amount of government aid to nearly $6tn since the pandemic started in the United States in March 2020.
Nearly half of the population has been vaccinated against Covid-19, allowing Americans to travel, frequent restaurants, attend sporting events and engage in other services-related activities that were curbed early in the pandemic.
Consumer spending, which accounts for more than two-thirds of the US economy, grew at an 11.8% rate in the second quarter, boosted by demand for services.
While spending on goods remained strong, the pace likely slowed from earlier in the pandemic, when Americans were cooped up at home.
The economy also received a further boost from business Investment, especially on equipment, as companies ramped up production.
Though the fiscal boost is fading and Covid-19 cases are rising in states with lower vaccination rates, consumer spending will likely continue to grow.
Households accumulated at least $2tn in excess savings during the pandemic.
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