U.S. second-quarter growth increased; increased corporate profits

WASHINGTON, Aug 26 (Reuters) – The US economy grew slightly faster than initially thought in the second quarter, raising the level of gross domestic product above its pre-pandemic peak, already which increased the massive fiscal stimulus and the impact of vaccinations against COVID-19 spending.

Thursday’s Commerce Department report also showed a sharp rise in business profits, which should allow companies to continue to buy equipment and hire workers and keep the economy on a solid growth path in the third quarter, though cases of growing coronavirus are consuming consumers. .

Gross domestic product rose at an annualized rate of 6.6%, the government said in its second estimate of GDP growth for the April-June period. This was revised from the 6.5% expansion rate recorded in July.

Economists surveyed by Reuters expected second-quarter GDP growth to rise at a rate of 6.7%.

The economy grew at a rate of 6.3% in the first quarter and has recovered from the heavy losses suffered during the two-month recession of COVID-19. The level of GDP is now 0.8% higher than it was at the peak in the fourth quarter of 2019.

The upward revisions in GDP growth in the last quarter reflected a slightly more robust pace of consumer spending than initially forecast. The government disbursed one-off stimulus checks on some middle- and low-income households during the quarter.

The Federal Reserve has maintained its extremely easy monetary policy stance, keeping interest rates at historically low levels and raising stock market prices.

Consumer spending, which accounts for more than two-thirds of the U.S. economy, also saw an increase in vaccinations, which fueled demand for services such as air travel, hotel accommodation, catering and entertainment.

Growth in consumer spending rose to a rate of 11.9% compared to the rate of 11.8% previously reported. But the momentum appears to have slowed in the early third quarter amid a resurgence of COVID-19 infections caused by the Delta variant of the coronavirus.

Persistent bottlenecks in the supply chain also cause a shortage of goods, such as motor vehicles and some appliances, and hurt retail sales. Credit card data suggests that spending on services such as airfare, cruises, hotels and motels has dropped.

“This is an increase in speed due to Delta’s interaction and supply-side constraints,” said Michelle Meyer, chief U.S. economist at Bank of America Securities in New York. “We still believe the foundations of the economy are solid and all signs point to strong underlying demand.”

US stocks opened up largely. The dollar (.DXY) rose against a basket of currencies. US Treasury prices were mostly lower.

DELETED INVENTORIES

The moderation in consumer spending is likely to be offset by strong business investment in equipment, which recorded a fourth consecutive quarter of double-digit growth.

Domestic earnings after taxes without inventory valuation or capital consumption adjustments, conceptually more similar to the S&P 500 earnings, rose at a rate of $ 303.6 billion, or a rate of 12.8%, in the second quarter, compared to 9.4% in January-March. point. Profits increased 69.3% from a year ago.

When measured from an income standpoint, the U.S. economy grew at a rate of 1.6% in the second quarter after growing at a rate of 6.3% in the first quarter. The moderate increase in gross domestic income reflected an increase in subsidies, which remain in the calculation of the IDG.

The average GDP and GDI, also known as gross domestic production and considered a better measure of economic activity, increased at a rate of 4.0% after having increased at a rate of 6 , 3% the first three months of the year.

Bank of America Securities cut its GDP growth forecast for the third quarter at a rate of 4.5% from 7.0%. Last week, Goldman Sachs economists lowered their growth estimate for this quarter to a rate of 5.5%, from a rate of 9%.

Growth is expected to increase in the fourth quarter, partly driven by companies conducting inventories, which fell during the first half of the year to meet strong demand. Overall, economists expect 7% growth this year, which would be the strongest yield since 1984.

Although the momentum of the fiscal stimulus is declining, consumer spending continues to be based on a strengthening of the labor market.

A separate report from the Department of Labor showed Thursday that initial claims for state unemployment benefits rose 4,000 to 353,000 seasonally adjusted for the week ended Aug. 21.

Economists had forecast 350,000 applications for the past week. Adjusting the data for seasonal fluctuations is complicated at this time of year, a task that has been complicated by the pandemic. This could explain the increase in applications last week. Unadjusted claims fell 11,699 to 297,765 last week.

Companies cling to their workers amid a labor shortage. The lack of nursery schools and fears of contracting the virus have been blamed for the shortage of workers, which is partly contributing to the employment of 5.7 million jobs below its maximum in February 2020. A at the end of June there were a total of 10.1 million jobs.

At least 25 states led by Republican governors have come out of federal-funded unemployment programs, including a $ 300 weekly payment, which companies said encouraged jobless Americans to stay home.

However, there is no evidence that the early termination of federal benefits has led to an increase in hiring in these states. Government-funded benefits will expire on September 6th.

“The persistence of the pandemic, exacerbated by the proliferation of the Delta variant, could delay the expected recovery,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “On the rise, faster-than-expected approvals for the general population …” would allow parents to get back to work sooner. “

Report by Lucia Mutikani Edited by Chizu Nomiyama and Paul Simao

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