WASHINGTON: The US economy grew a bit faster than initially thought in the second quarter, lifting the level of gross domestic product above its pre-pandemic peak, as massive fiscal stimulus and the impact of COVID-19 vaccinations boosted spending.
The report from the Commerce Department on Thursday also showed a hefty increase in corporate profits, which should allow businesses to continue buying equipment and hiring workers, and keep the economy on a solid growth path in the third quarter even as soaring coronavirus cases cool consumer spending.
Gross domestic product increased at a 6.6% annualized rate, the government said in its second estimate of GDP growth for the April-June period. That was revised up from the 6.5% pace of expansion reported in July.
Economists polled by Reuters had expected that second-quarter GDP growth would be raised to a 6.7% pace. The economy grew at a 6.3% rate in the first quarter, and has recouped the steep losses suffered during the two-month COVID-19 recession. The level of GDP is now 0.8% higher than it was at its peak in the fourth quarter of 2019.
The upward revisions to last quarter's GDP growth reflected a slightly more robust pace of consumer spending than initially estimated. The government disbursed one-time stimulus checks to some middle- and low-income households during the quarter. The Federal Reserve has maintained its ultra easy monetary policy stance, keeping interest rates at historically low levels and boosting stock market prices.
Consumer spending, which accounts for more than two-thirds of the U.S. economy, also got a lift from vaccinations, which fueled demand for services like air travel, hotel accommodation, dining out as well as entertainment.
Growth in consumer spending was raised to an 11.9% rate from the previously reported 11.8% pace. But momentum appears to have slowed early in the third quarter amid a resurgence of COVID-19 infections driven by the Delta variant of the coronavirus.
Persistent bottlenecks in the supply chain are also causing shortages of goods like motor vehicles and some household appliances, hurting retail sales. Credit card data suggests spending on services like airfares, cruises as well as hotels and motels has been slowing.
"This is a speed bump due to the interaction of Delta and supply-side constraints," said Michelle Meyer, chief U.S. economist at Bank of America Securities in New York. "We still believe the foundation for the economy is solid and all signs point to strong underlying demand."
U.S. stocks opened largely lower. The dollar rose against a basket of currencies. U.S. Treasury prices were mostly lower.