Business & Economy

US economy grew 1.6 percent in 2nd quarter

Washington, Sep 30 (EFE).- The US economy continues its sustained recovery after its partial collapse during the coronavirus pandemic and expanded by 1.6 percent during the second quarter, although supply problems and the end of several fiscal stimulus programs could cause it to lose a bit of steam in the second half of the year.

The country’s GDP grew by 1.6 percent compared with its performance during the year’s first quarter, thus showing no change from what had been expected, the US Bureau of Economic Analysis (BEA) reported on Thursday.

The third and latest calculation of quarterly economic activity indicated that, in annualized terms, the economy grew by 6.7 percent, slightly above the earlier 6.6 percent calculation, and this reflects the positive impact of reopening many US businesses, the vaccination program and the effect of the government’s assorted stimulus programs.

Once again, the official report said, “government assistance payments in the form of loans to businesses and grants to state and local governments increased, while social benefits to households, such as the direct economic impact payments, declined.”

The calculated value of US economic activity already exceeds the levels prior to the Covid-19 pandemic.

Nevertheless, analysts feel that given the difficulties still facing global supply chains and the progressive withdrawal of certain federal aid plans, like extra unemployment subsidies, US economic performance could decelerate slightly in the third and fourth quarters.

A week ago, the Federal Reserve slightly reduced its forecast for economic growth for 2021 to 5.9 percent, down from the 7 percent estimated three months ago, although this lower figure would still be very solid growth after the contraction of 3.4 percent in the US economy in 2020.

The big economic concern in the US, however, continues to be inflation, which is at its highest level in a decade.

Despite the fact that in August annualized inflation fell by one tenth of a percent to an annualized 5.3 percent, in the first sign of a cooling of prices after months of sustained rise, inflation still remains at a relatively high level and has been above an annualized 5 percent for three consecutive months.

In this regard, on Tuesday, US Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell acknowledged in an appearance before Congress that inflation will last longer than expected vis-a-vis their calculations in recent months.

Powell told lawmakers to look at the automotive companies and at the cargo ships anchored off Los Angeles, saying that there really is a mismatch between supply and demand and the US needs to have the supply blockages reduced before inflation can come down.

Yellen said that inflation will probably be about 4 percent this year, and will certainly be above 2 percent, which is the annual goal of the Fed.

The big unknown is whether the rebound in prices is temporary and a result of the lifting of restrictions imposed to deal with the pandemic and the economic reopening, or whether it is due to deeper reasons, which would be of greater concern.

The Fed still feels that the price rise is transitory, estimating that in 2022 the rise in overall prices will moderate to 2.2 percent, near the annual goal of 2 percent.

On the other hand, the US labor market continues to show progress, albeit at a slower rate than hoped, and the unemployment rate at the end of August was 5.2 percent, compared with 6.7 percent at the end of 2020. EFE afs/pamp/rrt/bp

Related Articles

Back to top button