The U.S. economy grew less than expected in the three months through June as supply-chain disruptions and labor shortages slowed the pace of economic activity while the country reopened from its COVID-19 lockdowns.
Gross domestic product – the broadest measure of economic performance – grew at a 6.5% annual rate during the second quarter, according to an advance estimate released Thursday by the Commerce Department. Analysts surveyed by Refintiv were expecting 8.5% growth. First-quarter GDP was revised down to 6.3% from its previous reading of 6.4%.
The above-trend growth in the second quarter reflected the continued reopening of the U.S. economy and government support via business loans, stimulus checks and extended unemployment benefits.
Thursday’s report offers “more evidence that stimulus provided surprisingly little bang for its buck, with the economy quickly pushing against unexpected supply constraints instead, which have driven inflation higher,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Businesses have since the economy reopened navigated supply-chain issues caused by factories shutting down to help slow the spread of COVID-19. They have also struggled to find workers as extended unemployment benefits have encouraged many to stay home.
The issues have combined to lift core personal consumption expenditures, the Federal Reserve’s preferred inflation measure, to 3.4% annual growth, the fastest since 1992.
Looking ahead, economists worry that headwinds to the economy remain.
“Supply chains are far from getting back to normal, and the story of the COVID-19 pandemic, including variants, is far from being finalized,” said Mark Hamrick, senior economic analyst at Bankrate.