U.S. slightly raises quarter’s GDP estimate to 6.7%

WASHINGTON — The U.S. economy expanded at a 6.7% annual pace from April through June, the Commerce Department reported Thursday, slightly upgrading its estimate of last quarter’s growth in the face of a resurgence the delta variant of covid-19.

The government’s estimate of growth in the second quarter — its last of three — was up from its previous estimate of a 6.6% annual pace that will likely mark a high point for the economy’s expansion this year as the virus slows some activity, government support programs wind down and manufacturing supply-chain issues persist.

Thursday’s report from the government showed that the nation’s gross domestic product — its total output of goods and services — accelerated from a 6.3% annual rate in the first three months of the year.

A key factor in the upgraded growth estimate for the April-June quarter was a slightly higher level of consumer spending, which accounts for roughly 70% of economic activity. Consumer spending grew at a 12% annual rate, the fastest expansion since a surge in the third quarter last year, when the economy began to re-open.

Stronger export sales also added to the increased growth estimate for the second quarter. Exports rose at an annual rate of 7.6% after having fallen in the first quarter.

Business equipment investment was also up from the government’s previous estimate, expanding at a solid 12.3% rate.

These gains were partly offset by a sharper increase in imports, which subtract from economic growth. Imports rose at a 7.1% annual rate in the second quarter.

The report showed that an inflation measure tied to gross domestic product that excludes volatile energy and food costs rose 3.4% over the past year. That is the fastest such pace since 1991 and well above the Federal Reserve’s 2% goal for annual inflation.

During the first half of the year, the economy was being boosted by vast federal support for the recovery from the pandemic recession — trillions of dollars in individual stimulus payments, expanded unemployment aid and help for small businesses.

Now, with those programs winding down or having already expired and with the delta variant’s spread having discouraged some people from flying, shopping and eating out, most economists say they think growth is slowing in the July-September period. Most have estimated an annual rate of around 4% for the current quarter.

“The delta variant became a bit of a sandstorm keeping the economy from growing faster,” said Sung Won Song, economics and business professor at Loyola Marymount University in Los Angeles. “The virus contributed to supply shortages and labor shortages.”