Consumers are fueling the economic recovery.
Consumer spending rose 2.8 percent in the second quarter, helping to offset declines in other parts of the economy. Spending on services was particularly robust as widespread vaccinations and falling coronavirus cases led Americans to return to restaurants, nail salons and other in-person activities.
“We finally saw the full pivot to services driving consumer spending instead of goods,” said Diane Swonk, chief economist for the accounting firm Grant Thornton.
Spending on goods remained strong, too, partly reflecting the continuing impact of the third round of stimulus checks, which arrived in Americans’ bank accounts in the spring.
Business investment was also relatively strong, rising 1.9 percent, as companies stepped up spending on technology and equipment.
The housing sector, however, was a drag on growth, shrinking 2.5 percent after three straight quarters of strong gains. That might seem surprising given stories of frenetic bidding wars in red-hot housing markets. But what matters to G.D.P. is construction, and new home building has been hampered by shortages of labor and supplies, and in particular the high price of lumber.
Overall growth in the second quarter fell significantly short of economists’ expectations. But that was largely because of weaker-than-expected government spending, particularly at the state and local level, as well as an unexpectedly sharp drop in inventories. Both of those factors are likely to reverse later this year.
Source: Economy - nytimes.com
