The U.S. economy grew less than expected in the three months to June, as supply chain disruptions and labor shortages slowed the pace of economic activity as the country reopened its closures related to COVID-19.
Gross domestic product – the broadest measure of economic performance – grew at an annual rate of 6.5% during the second quarter, according to a preliminary estimate released Thursday by the Commerce Department. Analysts polled by Refintiv were forecasting growth of 8.5%. First quarter GDP was revised down to 6.3% from its previous reading of 6.4%.
Above-trend growth in the second quarter reflected the continued reopening of the US economy and government support through business loans, stimulus checks and extended unemployment benefits.
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Thursday’s report offers “more evidence that stimulus measures have been surprisingly unprofitable as the economy quickly clashes with unexpected supply constraints, which has pushed up inflation,” said Paul Ashworth, Chief US Economist at Capital Economics.
Since the economy reopened, businesses have overcome supply chain issues caused by plant closures to help slow the spread of COVID-19. They have also struggled to find workers, as extended unemployment benefits have encouraged many to stay at home.
The problems combined to push basic personal consumption spending, the Federal Reserve’s preferred measure of inflation, to 3.4% annual growth, the fastest since 1992.
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Looking ahead, economists worry about continuing headwinds for the economy.
“Supply chains are far from back to normal, and the story of the COVID-19 pandemic, including the variants, is far from final,” said Mark Hamrick, senior economic analyst at Bankrate.