Fuelled by vaccinations and government aid, the U.S. economy grew at a solid 6.5 per cent annual rate last quarter in another sign that the nation has achieved a sustained recovery from the pandemic recession. The total size of the economy has now surpassed its pre-pandemic level.
Thursday's report from the Commerce Department estimated that the nation's gross domestic product -- its total output of goods and services -- accelerated in the April-June quarter from an already robust 6.3 per cent annual growth rate in the first quarter of the year.
Companies, too, spent with confidence last quarter. Business investment surged at an 8 per cent annual rate in the April-June quarter, adding 1.1 percentage point to GDP. Underpinning the rapid recovery have been trillions in federal rescue money, ranging from stimulus checks to expanded unemployment benefits to small business aid to just-distributed child tax credit payments. And millions of affluent households have benefited from a vast increase in their wealth resulting from surging home equity and stock market gains.
Overhanging the bright economic forecasts is the threat posed by the delta variant. The U.S. is now averaging more than 60,000 confirmed new cases a day, up from only about 12,000 a month ago. Should a surge in viral infections cause many consumers to hunker down again and pull back on spending, it would weaken the recovery.
The economy is also receiving substantial support from the Federal Reserve. On Wednesday, the Fed reaffirmed that it will maintain its key short-term interest rate at a record low near zero to keep short-term borrowing costs low. It will also continue to buy government-backed bonds to put downward pressure on long-term loan rates to encourage borrowing and spending.
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