Economic

The US economy grew slightly more than we thought last quarter

Between April and June, US gross domestic product grew at an annualized and seasonally adjusted rate of 6.6%.

The first look at the data last month put the growth rate at 6.5%, way underperforming the 8.5% rate economists’ had expected. Still, it represented the best quarterly growth rate since last fall when the recovery boosted the economic expansion.

The small revision reflected larger investments in things like equipment, as well as more exports. Investments in inventories and real estate, as well as state and local government spending were revised down.

“Business inventories are way too low,” said PNC Senior Economist Bill Adams in a note to clients. “It is hard to overstate how screwed up global supply chains are. Delivery delays and shortages have made it extremely difficult for businesses to maintain inventories and prevented an even faster economic rebound.”

Adams predicts the economy will get a big boost from inventory restocking in the second half of the year, which will sustain “very rapid” economic growth.

The report also included a look at how America’s corporations did in the spring and early summer. Banks and financial corporations saw their profits soar $53.7 billion, up from only $1.3 billion in the first quarter.

Non-financial business profits grew $169.8 billion following a $133.2 billion increase at the start of the year.

Although the recovery is on solid footing, it isn’t currently as strong as economists had expected a few months ago, said Matthew Sherwood, global economist at The Economist Intelligence Unit, in emailed comments. Sherwood expects 6% GDP growth for the year, predicting Covid, inflation and the global supply chain problems will continue to dampen consumers’ spirits and prevent a faster economic rebound.

The PCE price index — the inflation measure included in the GDP report — was revised up by 0.1 percentage points to 6.5%, the highest since fall 1982. Excluding good and energy, which tend to be more volatile, inflation stood at 6.1%, the highest level since 1983.

Higher inflation has been a symptom of the pandemic recovery as well as supply chain chaos driving prices up further. In July, consumer price inflation — a different measure of prices — moderated after rising to a 13-year high.