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In a turnaround that seemed unthinkable as we were scrambling for toilet paper last March, the US economy has returned to its pre-pandemic size in Q2, according to the GDP report released yesterday by the government.
- It shows that vaccinations + businesses reopening + sustained government support = a recipe for supercharged growth.
If that’s
the parade, here’s a little rain: The 6.5% annual growth rate last
quarter fell below forecasts, showing there are still some mustard
stains on the economy’s T-shirt.
What’s going well
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You: Give yourself a pat on the back, because you, the American consumer, helped drive the recovery. Consumer spending increased 11.8% annually, the second-biggest growth spurt since 1952.
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Business investment: Companies feeling emboldened by stronger demand poured money into equipment and developing intellectual property.
What’s not working
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Supply chain snags: Apple and Tesla this week joined the chorus of companies warning that the chip shortage was hurting their businesses. Meanwhile, logjams persist in ports around the world, leading to shipping delays and inventory crunches for US companies.
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Where are the workers? If
you’ve read the Brew over the last, oh, six months, you know that
businesses are struggling to hire workers, which means they’re not able
to meet customer demand. “The very tight labor market has resulted in
our company not growing while there are plenty of growth opportunities,”
one Texas business owner told the Dallas Fed.
And what about the D-word?
That is, how will the spread of the Delta variant affect the economy going forward?
“We’re just going to have to watch,” Fed Chair Jerome Powell said this week.
But in general, he thinks with high vaccination rates the “effects will
probably be less. There probably won’t be significant lockdowns.”
Bottom line: The
US economy took a gut punch from the global pandemic and came out with
vital signs intact, if a little bruised. And depending on the length and
severity of the recent Covid spike, Delta may prove another big test.
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