By Geoffrey Smith
Investing.com -- The U.S. economy didn't grow as fast as analysts expected in the second quarter, as labor and product shortages across various industries offset a rebound in service activity.
Much of the all important service-sector had reopened for business between April and June as the nation's vaccination program and seasonal factors allowed a relaxation of public health measures to stop the spread of Covid-19.
All the same, gross domestic product grew at an annualized rate of only 6.5%, well below the 8.5% rate forecast and only a marginal acceleration from the 6.4% registered in the first quarter.
The figures are the first reading for the quarter, and are likely to be revised in the coming weeks. While subject to revision, they stand in contrast to widespread reports of a broad and rapid rebound.
The Bureau of Economic Analysis said that the figures reflected "increases in personal consumption expenditures (PCE), non-residential fixed investment, exports, and state and local government spending."
These "were partly offset by decreases in private inventory investment, residential fixed investment, and federal government spending", the BEA said. The decline in federal spending happened despite the latest round of stimulus checks approved by the Biden administration and Congress. Anecdotal reports suggest much of the stimulus was spent on imported goods, which are subtracted from the calculation of GDP. Imports started the quarter at a blistering pace: having hit a record $277 billion in March before falling to $273 billion in April.
Elsewhere, there was fresh evidence that the labor market is struggling to sustain the improvement it showed earlier in the year. Initial jobless claims topped 400,000 for the second week in a row, rather than falling to 380,000 expected.
In the week through July 10, the overall number of people claiming any kind of unemployment benefit actually rose by over 500,000 to 13.16 million.