The U.S. economy increased at a disappointing rate in Q2

The U.S. economy surged at a disappointing rate in the second quarter of the year. This was driven by the rising number of coronavirus infections, although the country managed to escape the shackles of the virus. It indicates that the U.S. still has more work to do.

GDP, during the April-to-June period, increased by 6.5% on an annualized basis. This is slightly higher than the first-quarter rise of 6.3%.

Remarkably, the surge was considerably less than the 8.4% Dow Jones estimate.

Meanwhile, gross private domestic investment declined 3.5% as slumps in private inventory and residential investment held back gains. Despite the ballooning budget deficit, growing imports and a 5% drop in the rate of federal government spending were also factors.

It’s essential to mention that the overall rise came thanks to growing personal expenditures, which surged 11.8%. Notably, consumers accounted for 69% of all activity. Furthermore, exports, nonresidential fixed investment, and state and local government spending also helped raise output.

GDP growth might slow to 3.5% on an annualized basis in the second half of 2021

Additionally, the personal savings rate fell sharply to $1.97 trillion from $4.1 trillion in the previous period.

The economy dropped 31.4% in the second quarter of 2020. However, it recovered to 33.4% in the subsequent three-month period and has resumed pushing toward normal since.

Paul Ashworth, the chief U.S. economist at Capital Economics, announced that the important news is that the economy has now beaten its pre-pandemic level.

Furthermore, ashworth announced that GDP growth is likely to slow to 3.5% annualized in the second half of 2021.

Furthermore, the Labor Department reported 400,000 people filed initial claims for unemployment benefits for the week ended July 24. That level is almost double the pre-pandemic level and was above the 380,000 Dow Jones estimate. However, it dipped from the previous week’s 424,000.