Air Freight News

US GDP trails forecast even as consumer spending surges

U.S. growth missed forecasts in the second quarter as the effects of supply-chain constraints reverberated through the economy and took the shine off one of the biggest gains in consumer spending in decades.

Gross domestic product expanded at a 6.5% annualized rate following a revised 6.3% pace in the first quarter, the Commerce Department’s preliminary estimate showed Thursday. Federal government outlays, residential investment and inventories weighed on the figure.

Personal consumption, the biggest part of the economy, advanced an annualized 11.8%, exceeding forecasts.

The inflation-adjusted value of domestically produced goods and services climbed to an annualized $19.36 trillion, eclipsing its pre-pandemic peak.

The median forecast in a Bloomberg survey of economists called for an 8.4% increase in second-quarter GDP. Stock-index futures climbed after the report, the yield on the 10-year Treasury note rose and the dollar weakened.

Inventories took a 1.1 percentage points bite out of second-quarter GDP, while residential investment reduced growth by about 0.5 percentage point.

However, Americans had both the wherewithal and the opportunity to ramp up spending on services such as dining out amid vaccinations, government aid and a broader reopening of the economy. Services added 5.1 percentage points to second-quarter growth. Outlays for merchandise remained solid as well.

Savings Drop

Looking ahead, economic growth will be challenged by waning federal support and lingering supply and labor constraints. The report showed the saving rate dropped to 10.9% in the second quarter from 20.8%, indicating Americans are spending cash built up during the pandemic.

At the same time, the rapidly spreading delta variant of Covid-19 present risks to the spending outlook.

Businesses have struggled to keep pace with the outpouring of pent-up demand, pushing prices skyward and eroding recent wage gains. The personal consumption expenditures price index excluding food and energy costs, followed closely by Federal Reserve officials, climbed an annualized 6.1% in the second quarter, the biggest gain since 1983.

Unlike output, the jobs market is far from reaching its pre-pandemic strength. The Fed’s mandate of supporting a robust labor market recovery—along with added uncertainty around the delta variant—suggest the central bank is not rushing to remove monetary policy support.

“We’re not there. And we see ourselves as having some ground to cover to get there,” Fed Chair Jerome Powell said at a press conference Wednesday after the Federal Open Market Committee held interest rates in a range near zero and maintained its pace of asset purchases until “substantial further progress” was made on employment and inflation.

Supply shortages and logistics challenges are proving to be a lingering headwinds for companies including Apple Inc., Fastenal Co. and Whirlpool Corp., according to recent earnings calls.

“The supply chain constraints will not immediately disappear,” Whirlpool Chief Executive Officer Marc Bitzer said on the appliance-maker’s July 22 earnings call. “They gradually get better, but we will be fundamentally faced with a supply constraint for some quarters to come.”

Those constraints have also led several economists to downgrade U.S. growth forecasts in recent weeks for the remainder of the year.

Bloomberg
Bloomberg

{afn_job_title}

© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

Similar Stories

China scraps tariffs on Australian wine as relations improve

China lifted its punitive tariffs on Australia’s wine exports, signaling an end to a three-year campaign of trade pressure on Canberra and raising hopes for a revival of the billion-dollar…

View Article
US is asking allies to tighten servicing of chip gear in China

The US is asking allies to impose more restrictions on maintaining chipmaking equipment in China as the Biden administration seeks to further thwart Beijing’s ambition to build cutting-edge semiconductors.

View Article
France delays new EU-Canada trade deal vote after Senate setback

The French government will delay holding another vote on the European Union’s free-trade deal with Canada, after an embarrassing setback in the Senate.

View Article
China ‘very close’ to ending Australia wine tariffs, business chief says

The Chinese government is “very close” to lifting the heavy tariffs on Australian wine imports, a business lobby said, while tempering expectations about all producers returning to the market after…

View Article
https://www.ajot.com/images/uploads/article/China_soybean_chart.jpg
Gap in China’s soybean trade casts doubt on data reliability
View Article
https://www.ajot.com/images/uploads/article/White_corn.jpg
El Nino may see first S. Africa white-corn import since 2017
View Article