Consumer Spending Was a Big Factor in G.D.P. Expansion
Consumers fuel the economic recovery.
Consumer spending rose 2.8% in the second quarter, helping to offset declines in other sectors of the economy. Spending on services has been particularly significant, as widespread immunizations and declining coronavirus cases have led Americans to return to restaurants, nail salons and other in-person activities.
“We have finally seen the full pivot of services driving consumer spending instead of goods,” said Diane Swonk, chief economist at the accounting firm Grant Thornton.
Spending on goods also remained strong, partly reflecting the lingering impact of the third round of stimulus checks, which hit Americans’ bank accounts in the spring.
Business investment was also relatively strong, up 1.9% as businesses increased spending on technology and equipment.
The housing sector, however, was a drag on growth, falling 2.5% after three consecutive quarters of strong increases. This may seem surprising given the stories of frenzied auction wars in the scorching housing markets. But what matters to GDP is construction, and construction of new homes has been hampered by labor and supply shortages, and in particular the high price of lumber.
Overall growth in the second quarter was significantly lower than economists’ expectations. But that was largely due to lower than expected public spending, especially at state and local levels, as well as an unexpected drop in stocks. These two factors are expected to reverse later this year.
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