The numbers: The U.S. grew a bit faster in the spring than previously estimated, but not enough to change the underlying growth trend in an economy that’s recovered quite rapidly from the pandemic.
Gross domestic product, the official scorecard for the U.S. economy, rose at a revised 6.6% annualized pace in the second quarter, the government said Thursday. Originally the increase was put at 6.5%.
The slight increase in GDP reflected somewhat stronger consumer spending and U.S. exports than initially reported.
The revised GDP report also included the first look at corporate profits in the second quarter. Adjusted pretax profits jumped at a 9.2% annual rate and suggest businesses have plenty of capital to continue to invest and hire.
Indeed, the economy was still expanding at a robust pace in the third quarter even as the delta variant of the coronavirus flared up and government stimulus had mostly evaporated.
Economist polled by the Wall Street Journal estimate third-quarter GDP will increase by 7%.
Big picture: The details of the revised GDP don’t change the 10,000 foot view of the economy. Consumers are spending plenty of money. Businesses are hiring and investing. And governments have avoided the stifling coronavirus restrictions they used early in the pandemic.
The coronavirus delta variant is still a wild card, but the biggest problems confronting the economy are widespread shortages of labor and materials that have caused inflation to soar and threaten to slow the recovery.
Inflation climbed at a 6.5% annual clip in the second quarter.
Key details: Consumer spending, the lifeblood of the economy, increased by a revised 11.9% in the second quarter vs. the initial 11.8% estimate. Consumer outlays account for about 70% of economic activity.
The increase in exports was revised up to 6.6% from 6%, while the rise in imports was knocked down to 6.7% from 7.8%.
Most other figures in the report were little changed. Business investment fell, as did government spending.
What they are saying? “Corporate America is doing great,” said senior economist Bill Adams of PNC Financial Services. “Rapid corporate profit growth and very low interest rates have supported the stock market’s rise to record highs.”
“While the delta variant remains a key downside risk and virus fatigue is leading to a strong negative emotional response, the economy is unlikely to go into reverse,” lead U.S. economist Lydia Boussour of Oxford Economics told clients in a note.