The third reading of the US GDP report showed that economic activity in the country increased in the second quarter.
The Department of Commerce said the economy grew to 6.7% from April to June, slightly above the previous estimate of 6.6%. This clearly exceeded the expectations of economists as they predicted unchanged indicators.
However, some point out that the second quarter may be the peak of growth as fiscal stimulus measures begin to wind down. And just like that, many are oblivious to the latest GDP data, focusing instead on how the fourth wave of COVID-19 infections affected activity. As such, third-quarter growth estimates are below 5%.
The report also notes that economic growth occurred due to increased inflationary pressures. Currently, personal consumer spending remains elevated at 6.5%.
But some economists are concerned of stagflation - a period of low growth and higher inflation - amid continued supply problems in the country. Earlier this week, Fed Chairman Jerome Powell admitted that supply constraints appear to be slowing economic activity.
At the same time, jobs are lacking, which provoked gold to bounce off six-week lows. Meanwhile, the dollar index fell to daily lows.
Powell said this is a reason for low interest rates, so during the September monetary policy meeting, he disclosed that the Fed could begin reducing bond purchases in November.
In terms of inflation, Powell said he was not sure if price pressures would ease.
On a different note, the US is facing a default risk over the national debt ceiling. US Treasury Secretary Janet Yellen recently warned that there would be disaster if the Congress insists not to raise it. She said her department will run out of money by October 18, and this will be the first US default in history.
Yellen also continued to urge the Congress to work on a bipartisan basis.
