US economy grew at solid 6.5% rate in Q2 and returns to pre-pandemic level
The US economy expanded at a 6.5% rate in the second quarter, showing slight improvement from the first quarter’s 6.3% growth, but disappointed expectations for 8.5% rise.
Solid figures, despite the pace was below expectations, as consumer spending and business investments were tempered by supply chain constraints, boosts expectations that economic expansion will remain strong for the remainder of this year.
Economists say that real GDP has fully recovered what it lost during the downturn in 2020 but remain cautious as resurgence of in Covid-19 infections, mainly its new Delta variant, higher inflation, if sustained, as well as ongoing chain supply disruptions, continue to pose a risk which could slow the economic activity.
The US economy is expected to grow around 7% this year, which would be the biggest annual growth since 1984, with prevailing optimism resulting in upgrade of the outlook for 2021 and 2022, compared to projections made in April.
The US government provided an aid worth nearly $6 trillion since the pandemic started in March 2020 that helped the economy to stay afloat during the crisis.
Nearly half of the population has been vaccinated against coronavirus that allows the population to start returning to pre-pandemic activities and boosts consumer spending, which accounts for more of two thirds of the US economy and is expected to continue to grow, despite rising cases of coronavirus infections in a number of states and fading fiscal support.
The US Federal Reserve also pointed to strong growth and diminishing negative impact from pandemic but remain cautious on existing risk to the outlook from slower than expected recovery in the labor sector and kept the interest rate and asset-purchases unchanged in its July policy meeting.