The American economy missed second-quarter GDP growth projections by a significant margin.
According to data released by the Department of Commerce on Thursday, the annualized GDP growth rate rose to 6.5% between April and June of this year. Although improving from 6.3% in the first quarter of 2021, the metric fell short of the 8.4% Dow Jones estimate.
According to a press release from the Bureau of Economic Analysis:
The second-quarter increase in real GDP reflected increases in consumer spending, business investment, exports, and state and local government spending that were partly offset by decreases in inventory investment, housing investment, and federal government spending. Imports, a subtraction in the calculation of GDP, increased.
The increase in consumer spending reflected increases in services (led by food services and accommodations) and goods (led by other nondurable goods, notably pharmaceutical products).
The increase in business investment reflected increases in equipment (led by transportation equipment) and intellectual property products (led by research and development).
CNBC notes that investment and savings rates dropped in the second quarter:
Gross private domestic investment fell 3.5% as declines in private inventory and residential investment held back gains. Rising imports and a 5% decline in the rate of federal government spending, despite the ballooning budget deficit, also were factors, the Bureau of Economic Analysis report said.
The personal savings rate dropped sharply, tumbling to $1.97 from $4.1 trillion in the previous period.
Although consumer spending was a primary driver of economic growth, real disposable personal income — personal income adjusted for inflation and taxes — fell by 30.6% in the second quarter after a 57.6% increase in the first quarter.
A similar report from the Bureau of Labor Statistics revealed that average hourly earnings in the United States increased from $29.35 in June 2020 to $30.40 in June 2021 — a 3.6% increase. When factoring in inflation through the Consumer Price Index, which has risen by 5.3% since June 2020, real average hourly earnings have fallen by 1.7% over the past year — despite the robust economic recovery from COVID-19 and the lockdown-induced recession.
The Bureau of Economic Analysis likewise noted that prices for American consumers witnessed a quarter-to-quarter increase of 5.7% — a finding that reflects rising inflation rates. Of particular note were increases in energy and food prices, which rose by 20.6% and 2% respectively.