In the 10 years (2010-19) since the Great Depression of 2007-09, the average annual rate of US economic growth has been 2.25%. In 2020, economic growth declined by 3.4% as the global pandemic forced the US economy to a screeching halt. In the second quarter of April to June 2020, the economy contracted at a massive annualized rate of 31.2%.
But the economy rebounded quickly. In the third quarter of 2020, economic growth soared at an annualized rate of 33.8%. In fact, the National Bureau of Economic Research reported that the pandemic-fueled recession, which began in February 2020, lasted only two months – the shortest recession in U.S. history.
On Thursday, the U.S. Bureau of Economic Analysis reported that during the recent second quarter of April through June, the economy grew at an annualized rate of 6.5 percent, slightly above the pace of the first. quarter of 6.3%. It also marked a complete return of economic production to its pre-pandemic level. The 6.5% growth rate, however, was well below the 8% rate Wall Street had predicted.
But Wall Street didn’t seem too phased out of the weaker-than-expected report. On Thursday, the Dow Jones Industrial Average gained 153 points to close within 59 points of its all-time high. The S&P 500 and NASDAQ also posted gains and ended Thursday’s trading session just below their respective highs.
For Wall Street, the focus has been on consumer spending, which accounts for 68% of our country’s economic growth. In the second quarter, consumer spending grew at a very robust annualized rate of 11.8%, beating the stellar first quarter rate of 11.4%. Furthermore, the report showed that further economic growth remains hampered not by a lack of consumer demand but by persistent constraints on the supply side. Disruptions to global supply chains, combined with persistent labor shortages, have hampered the ability of manufacturers and producers to meet strong consumer demand for goods and services.