The US economy grew at an annual rate of 6.5% in the second quarter

By Anneken Tappe, CNN Business

(CNN) – The US economy in the second quarter grew at a slower than expected pace but still at its fastest pace since last fall, growing at a seasonally adjusted annualized rate of 6.5%.

In terms of real gross domestic product – the broadest measure of economic activity – the economy has now recovered and become larger than its waist before pandemic.

Earlier this month, the National Bureau of Economic Research named the pandemic recession as the shortest ever recorded, lasting only two months: March and April 2020.

The economy grew less than expected between April and June of this year, as economists had forecast an annualized growth rate of 8.5%, and it also changed little from the first quarter when the economy grew at an annual rate of 6.3%.

Nonetheless, this is the largest increase in growth since the the nation roared in the third quarter of 2020 from the recession due to containment.

No more spending, no more inflation

The acceleration of the recovery has boosted consumer spending, including the latest round of stimulus checks, as well as the reopening of the economy and continued vaccination efforts that have allowed Americans to participate in public life again. safely. Consumers spent more on services, particularly on restaurant meals and travel.

Driven by the same dynamic, the inflation measures included in the GDP report rose throughout the spring.

For example, the price index that tracks personal consumption expenditure rose to 6.4% in the second quarter, its highest level since 1982. Excluding more volatile items like food and energy, l The price index stood at 6.1%, the highest reading since 1983.

The price increases are rampant. But the The Federal Reserve continued to characterize the spike in inflation as temporary During Wednesday’s monetary policy update, President Jerome Powell said the extreme price hikes were limited to a few areas particularly affected by the pandemic.

But the GDP report also highlighted the factors underlying the price increase: “Supply constraints and labor shortages have increased, suggesting a downward revision of our outlook.” said Sal Guatieri, senior economist at BMO. Investment in inventories and government spending declined in the second quarter.

While consumer spending was strong enough to offset the brakes on the recovery, “it is clear that these latest headwinds are slowing the dynamics of the economy,” Guatieri said.

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