Delta variant could slow US economy
WASHINGTON – The U.S. economy grew at a robust 6.6% annual rate last quarter, slightly faster than previously estimated, the government said Thursday in a report that pointed to a sustained consumer-led rebound from the pandemic recession. But worries are growing that the delta variant of the coronavirus is beginning to cause a slowdown.
The report from the Commerce Department estimated that the nation’s gross domestic product – its total output of goods and services – accelerated slightly in the April-June quarter from the 6.5% it had initially reported last month. The economy’s expansion last quarter followed a solid 6.3% annual growth rate in the January-March period.
In recent weeks, many economists have been downgrading their estimates of GDP growth for this quarter, and for 2021 as a whole, as the now-dominant delta variant has sent confirmed COVID-19 cases rising throughout the country.
New reported cases are now topping 150,000 a day, the highest level since late January. As a consequence, real-time tracking of consumer activities, notably for airline travel and restaurant dining, has weakened in recent weeks.
The government’s upgraded estimate for growth in the April-June quarter fell somewhat shy of expectations. Some economists had predicted a 7% or more annual rate. They based that view on a belief that consumer spending had accelerated even faster than the sizzling 11.8% rate first reported. Thursday’s revised estimate for consumer spending, which drives about 70% of economic activity, was upgraded by 0.1 percentage point to 11.9%.
The slight rise in the government’s estimate for April-June growth reflected, in part, stronger business investment, which grew at a solid 9.3% rate, and export sales, which were up at a 6.6% rate after falling in the first quarter. Offsetting that strength was a bigger drag from cutbacks in businesses inventory restocking and weaker home building, which fell at an 11.5% annual rate. This sector has been hurt by surging prices for materials and a shortage of construction workers.
Goldman Sachs has cut its forecast for annual growth in the current July-September quarter from 9% to 5.5%, citing the effects of the delta variant. Likewise, Wells Fargo economists have downgraded their third quarter GDP forecast from an 8.8% annual rate to 6.8%, also because of the surge in COVID cases.
Some forecasters have also reduced their outlook for the full year, thought by smaller amounts, in anticipation that the economy could re-accelerate in the final three months of 2021 if COVID cases ease as vaccines are increasingly administered. But uncertainty remains.