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The economy grows 6.5% but remains below expectations due to the COVID-19 hit

2021-07-29T16:17:48.816Z


Consumer spending and huge investment from the federal government support economic growth, which still shows the damage from the coronavirus.


By Jeff Cox - CNBC

The US economy grew at a disappointing pace in the second quarter, in a sign that the United States appears to be shedding the burden of the COVID-19 pandemic but still has work to do, the Commerce Department reported Thursday.

The Gross Domestic Product (GDP) from April to June accelerated by 6.5%.

This figure is slightly better than the 6.3% increase in the first quarter, which was revised slightly downwards.

But the consensus of experts put the expected increase at 8.4%.

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Gross private domestic investment fell 3.5%, and declining private inventories and residential investment held back gains.

According to the report by the Office of Economic Analysis, the increase in imports and the 5% decrease in federal government spending, despite the large budget deficit, were also determining factors.

The growth was mainly due to the increase in consumer spending, which rose 11.8% and accounted for 69% of all activity.

Non-residential fixed investment, exports, and state and local public spending also contributed to boost production.

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The GDP data also reflects how far the economy has come since the closures imposed during the first days of the pandemic, when state governments halted large economic sectors to combat the spread of the coronavirus.

At its lowest point, the economy slumped 31.4% in the second quarter of 2020;

it recovered 33.4% in the following three-month period and has continued to move towards normal since then.

Compared to the years before the pandemic, this would have been the strongest quarter since the third quarter of 2003.

Although production has remained below its pre-pandemic level, the National Economic Research Office declared that the recession that began in February 2020 had ended only two months later, the shortest on record.

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Even so, there are sectors of the economy that are still in difficulty, such as the labor market, which is struggling to return to normal.

Another piece of information released Thursday was that 400,000 people filed for unemployment benefits in the week ending July 24.

That level is nearly double the pre-pandemic norm and exceeds experts' estimate of 380,000. 

Source: telemundo

All news articles on 2021-07-29

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