With another impressive period of growth in the second quarter, the economy has recouped its recessionary losses and now exceeds its pre-pandemic size, the Commerce Department announced Thursday. But the 6.5% annualized growth rate reported by the agency was below many economists’ estimates, highlighting the difficulties businesses and consumers still face amid global supply constraints, labor shortages and lingering fears about Covid-19 across the country.
On the heels of 6.3% growth in the first quarter, and fueled by another round of income support from the federal government, many economists expected to see GDP surge by 8% or more in the second quarter, as consumers sitting on record savings made up for lost time by splurging on travel, entertainment and dining out. But bottlenecks throughout the economy limited the bounce-back growth, hitting businesses particularly hard as they struggled to provide sufficient stock and rebuild inventories.
Consumers to the rescue: Consumer spending grew at a blistering pace during the quarter, clocking in at an 11.8% annual rate. The total value of goods and services produced in the U.S. climbed to an annualized $19.36 trillion, above where it stood at the beginning of 2020. Those results bolstered the view that economic growth will maintain a robust pace of 6% or more for the full year.
“Consumers are going to continue to drive the economic train,” Mark Zandi, chief economist at Moody’s Analytics, told the Associated Press. “There is a lot of excess savings, a lot of cash in people’s checking accounts.”
Vulnerabilities persist: Although the economy continues to rebound, new outbreaks of Covid-19 could hamper the recovery. Other factors that could weigh on growth in the coming months include shortages of key components like microchips, rising inflation and labor shortages, especially in the low-wage service sector.
Still, many analysts emphasized the positive aspects of the latest data, and the Biden administration was quick to take credit for the solid report. Saying “America is on the move again,” White House Press Secretary Jen Psaki reminded reporters that the outlook has improved significantly in a relatively short period of time. “This wasn’t preordained – in fact, just one year ago, CBO predicted real GDP would be 3% below its pre-pandemic peak at this time,” she said in a statement. “But, thanks to shots in arms and checks in pockets, we’ve been able to far outstrip that and power a recovery twice as fast as after the last recession.”