US economic growth fell short of expectations in the second quarter, as ongoing supply chain disruptions and inventory declines outpaced strong gains in consumer spending.
According to preliminary figures published by the Commerce Department, the US economy expanded by an annualized 6.5%, following a downward-revised 6.3% growth in the previous quarter. However, the latest GDP reading was significantly below forecasts put out by economists polled by Bloomberg, which called for an 8.4% annualized increase.
Despite the poor economic data, the US economy has now eclipsed its pre-pandemic output levels for the first time since the onset of the Covid-19 crisis. Personal consumption accounted for some of the strongest gains in last quarter’s GDP data, as spending jumped to 11.8% year-over-year— the sharpest increase since 1952.
Conversely, however, gross private domestic investment plummeted 3.5%, amid a decline in private inventory and residential investment. Moreover, a 5% drop in federal government spending, coupled with rising imports also held back gains in the overall GDP print.
More importantly, however, was the Commerce Department’s latest PCE price index print, which rose 6.4%, following an increase of 3.8% in the first three months of the year. The core PCE index, which does not take volatile energy and food costs into account, jumped from 2.7% to 6.1% in the second quarter. The price of goods and services purchases by American consumers increased 5.7%, while energy prices were 20.6% higher in the second quarter.
The latest figures suggest that the US economy continues to face numerous bottlenecks in output, as raw material and labour shortages dampen the speed of the recovery. Following the news, the S&P 500 and the yield on the 10-year Treasury rose, while the US dollar weakened.
Information for this briefing was found via the Commerce Department and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.