US slightly revises up its GDP estimate for Q2 to 6.7%
A key factor in the upgraded growth estimate for the April-June quarter was a slightly higher level of consumer spending.
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The U.S. economy expanded at a 6.7% annual pace from April through June, the Commerce Department said on Sept. 30, slightly upgrading its estimate of last quarter’s growth in the face of a resurgence of COVID-19 in the form of the delta variant.
The government’s estimate of growth in the second quarter — its last of three — was up from its previous estimate of a 6.6% annual pace that will likely mark a high point for the economy’s expansion this year as the virus slows some activity, government support programs wind down and manufacturing supply-chain issues persist.
Sept. 30’s report from the government showed that the nation’s gross domestic product — its total output of goods and services — accelerated from a 6.3% annual rate in the first three months of the year.
A key factor in the upgraded growth estimate for the April-June quarter was a slightly higher level of consumer spending, which accounts for roughly 70% of economic activity. Consumer spending grew at a 12% annual rate, the fastest expansion since a surge in the third quarter last year, when the economy began to re-open.
Stronger export sales also added to the increased growth estimate for the second quarter. Exports rose at an annual rate of 7.6% after having fallen in the first quarter. Business equipment investment was also up from the government’s previous estimate, expanding at a solid 12.3% rate.
For 2021 as a whole, a panel of forecasters with the National Association for Business Economics has projected growth of 5.7%. That would mark a solid bounce-back from a 3.4% annual drop last year, when the economy was in the grips of the pandemic. And it would represent the most robust calendar-year growth since a 7.2% surge in 1984, when the nation was emerging from a deep recession.
An even stronger pace of expansion, though, had been expected for this year. But the surge in COVID cases has weakened growth, hiring and consumer confidence. In addition, persistent supply chain problems have shrunk production at auto plants and other manufacturers, further reducing growth. The supply chain problems are connected to the global surge in the pandemic, which has slowed production of computer chips and other vital components made in Asia.
The Federal Reserve has been nurturing the economy through ultra-low interest rates and $120 billion in monthly bond purchases that are intended to hold down long-term loan rates. But last week, the Fed signaled that it would likely start reducing those purchases as soon as November.
By late 2002 or early 2023, the Fed is expected to begin raising key short-term interest rate, which influences many individual and corporate loans.