- U.S. gross domestic product expanded at an annualized pace of 6.5% in the second quarter
- The Federal Reserve maintained the current federal-funds rate target range of 0% to 0.25%
- Consumer spending rose 1.0% in June from the prior month
Top Three Market Headlines
GDP Expands Strongly in Q2: The Commerce Department last week provided its first estimate of Q2 2021 U.S. gross domestic product (GDP), a measure of all goods and services produced. According to the report, GDP expanded at an annualized pace of 6.5% in the quarter, up slightly from the 6.3% annualized rate recorded in Q1. While the Q2 figure fell below economists' expectations, it pushed the size of the economy over its pre-pandemic level. Consumer spending on services and goods along with business investment drove GDP growth in the quarter, while federal government spending, residential construction, and decreases in inventory investment detracted from it.
Federal Reserve Maintains Current Monetary Policy: The Federal Reserve decided last week to keep its accommodative monetary policy stance that calls for keeping the federal-funds rate near zero and purchasing $120 billion in Treasury and mortgage bonds per month. While noting the strength of the economic rebound, Fed Chairman Jerome Powell said the central bank would maintain this policy until substantial further progress has been made toward the Fed's goals of maximum-employment and average inflation of 2% over time. Regarding the latter, the Fed acknowledged that "inflation has increased notably and will likely remain elevated in coming months before moderating."
Consumer Spending Ticks Higher in June: The Bureau of Economic Analysis reported last week that U.S. personal consumption expenditures (PCE) rose in June at a seasonally adjusted rate of 1.0% from the prior month and 13.6% from pandemic-impacted levels last year. This marked the third monthly increase in consumer spending out of the last four months. Gains were keyed by increased spending on a wide range of services, led by purchases of food services and accommodations as consumers continued to react to the reopening of the economy. At the same time, rising prices accounted for half of the dollar increase in spending, as the PCE price index rose 0.5% during the month.