Report: U.S. slightly upgrades GDP estimate for last quarter to 6.6%
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 AprilJune quarter fell somewhat shy of expectations. Some economists had predicted a 7% annual rate or more. 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.
“The real question is how well spending will hold up against the current delta wave,” said Leslie Preston, senior economist at TD Economics. “Some high-frequency indicators are pointing to a loss in momentum in spending as consumer caution creeps in.”