The U.S. economy grew at a solid 6.5% annual rate last quarter. The total size of the economy has now surpassed its pre-pandemic level.
The Associated Press
The quarterly figure was less than analysts had expected. But that was mainly because supply chain bottlenecks exerted a stronger-than-predicted drag on companies' efforts to restock their shelves. The slowdown in inventory rebuilding, in fact, subtracted 1.1 percentage points from last quarter's annual growth.
Yet overhanging the rosy economic forecasts is the possibility of a resurgent coronavirus in the form of the highly contagious delta variant. The U.S. is now averaging more than 60,000 confirmed new cases a day, up from only about 12,000 a month ago. Should a surge in viral infections cause many consumers to hunker down again and pull back on spending, it would weaken the recovery.
Consumer confidence has reached its highest level since the pandemic struck in March 2020, a key reason why retail sales remain solid as Americans shift their spending back to services — from restaurant meals and airline trips to entertainment events and shopping sprees. Businesses are also showing renewed faith in the economy, with orders for manufactured goods pointing to solid corporate investment.
The recovery, in fact, has been so rapid, with pent-up demand from consumers driving growth after a year of lockdowns, that one looming risk is a potential spike in inflation that could get out of control. Consumer prices jumped 5.4% in June from a year ago, the sharpest spike in 13 years and the fourth straight month of sizable price jumps.
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