The United States economy grew substantially in the second quarter (Q2) but still fell short of expectations as supply-chain disruptions and labour shortages continued to temper growth despite a big boom in consumer spending.
Gross domestic product (GDP) increased at an annual rate of 6.5 percent in the second quarter of 2021, according to an advance estimate from the US Bureau of Economic Analysis.
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In the first quarter, real GDP increased 6.3 percent, revised downward from 6.4 percent.
Consumer spending, the engine of US economic growth, grew by 11.8 percent in the second quarter, exceeding expectations.
Economic growth is expected to remain strong for the rest of the year. A resurgence in coronavirus infections caused by the Delta variant poses a serious risk to expansion, however.
There are also increasing concerns over the risks and impact of long-term inflation.
Policymakers from the Federal Reserve, the US central bank, voted unanimously to leave interest rates unchanged at the end of their two-day meeting on Wednesday. The Fed also said it would continue to support the nation’s economic recovery by buying bonds at a clip of $120bn per month.
The announcement came as no surprise given that the Fed has long signalled it will keep its benchmark rate near zero until the US labour market is fully healed from last year’s COVID-19 blow.
But Federal Reserve Chairman Jerome Powell said during a virtual press conference that the US central bank would be prepared to reconsider current monetary policy should inflationary risks to the economic recovery emerge.
The International Monetary Fund on Tuesday updated its growth forecasts for the US economy to 7.0 percent in 2021 and 4.9 percent in 2022, up 0.6 and 1.4 percentage points respectively, from initial forecasts in April.
President Joe Biden’s administration pumped $1.9 trillion in coronavirus pandemic relief into the US economy back in March, bringing the total amount of government aid to nearly $6 trillion since the pandemic started in the US in March 2020.
Americans, nearly half of whom have been vaccinated against the coronavirus, have started travelling and going to restaurants and events.
The stock market and ballooning home prices helped cushion Americans’ savings accounts, fostering a surge in consumer spending. What’s more, wages are rising as companies in the US try to entice workers to return to work.
The US Department of Labor on Thursday reported that initial claims for state unemployment benefits sank by 24,000 to a seasonally adjusted 400,000 for the week ended July 24.
The advance seasonally adjusted insured unemployment rate was 2.4 percent for the week ending July 17, unchanged from the previous week’s unrevised rate, according to the Department of Labor.