US GDP grows 6.5% in the second quarter and is below expectations

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The economy of United States grew solidly in the second quarter, with massive help from the US government and the vaccinations against covid-19 fueling spending on travel-related services.

The Gross Domestic Product (START) grew at an annualized rate of 6.5% in the last quarter, the US Commerce Department reported on Thursday. The economy grew at a revised 6.3% rate in the first quarter.

Economists polled by Reuters predicted GDP would grow at a rate of 8.5% last quarter. With the second-quarter estimate, the government released revisions to GDP data, which show the economy contracting 3.4% in 2020, instead of 3.5% previously estimated. This is still the biggest drop in GDP since 1946.

Revisions for growth in other years and quarters were minimal. From 2015 to 2020, GDP increased at an average annual rate of 1.1%, without revising previously published estimates.

Even with the second quarter marking the peak of US growth in this cycle, economic expansion is expected to remain solid for the remainder of the year. However, the resurgence of Covid-19 infections, driven by the Delta variant of the coronavirus, poses a risk to the scenario. Higher inflation, if sustained, and supply chain disruptions can also slow the economy down.

The Federal Reserve kept its benchmark interest rate close to zero on Wednesday and left its bond-buying program unchanged. Fed Chair Jerome Powell told reporters that the economic effects of the pandemic continue to wane, but risks to the outlook remain.

Economists expect growth of approximately 7% in the US this year, which would be the best performance since 1984. On Tuesday, the International Monetary Fund (IMF) raised its growth forecasts for the United States to 7.0% in 2021 and 4.9% in 2022, increases of 0.6 and 1.4 percentage points, respectively, compared to April forecasts.

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