U.S. economy expanded at 6.5% annualized rate in Q2

Emily McCormick breaks down the biggest takeaways from the latest read on gross domestic product (GDP), which showed growth in U.S. economic activity accelerated only slightly in the second quarter compared to the first.

Video transcript

MYLES UDLAND: Let's turn our attention away from markets here and talk a little bit about the US economy, getting the first look at second quarter GDP this morning and the numbers coming in quite disappointing. "Yahoo! Finance's" Emily McCormick joins us now for the details on this report. Emily.

EMILY MCCORMICK: Well, Myles, as you mentioned, a big disappointment on that headline second quarter GDP figure. If we take a look here at that GDP. On an annualized basis, that rising 6 and 1/2% quarter-over-quarter. Now, by pre-pandemic standards that would have been a pretty strong print, of course, still getting that mid to high single digit growth rate. But of course, a disappointment to economists, who had been looking for the second quarter of 2021 to really be that peak growth rate as we head into this recovery.

Now, taking a look at what consensus we're looking for, that was for an 8.4% GDP annualized rate. And this also only accelerates slightly from the 6.3% growth rate that we saw for the first quarter, which was revised down slightly from the 6.4% that was previously reported.

Now, taking a look here beneath that headline figure. We did have personal consumption, the biggest component of economic activity, topping estimates. That coming in at 11.8% annualized. And that was above the 10.5% rate that had been expected and also accelerated from an 11.4% print in the first quarter.

Then, do want to highlight that there were really four main drags that I was able to identify in the second quarter report. The first big one was on inventories, that dragging down GDP by about one full percentage point. So again, seeing some of these supply chain issues and port congestion concerns, that many of these companies have been talking about, really weighing on that headline growth.

Then, highlighting a number of other key drags here. Net exports shaving GDP down by about 0.44 percentage points. Government consumption expenditure is subtracting 0.3 percentage points after having contributed to GDP growth in the first quarter.

And then finally, residential fixed investment subtracting nearly 0.5 percentage points. So again, consistent with some of those weaker than expected housing market data and reports we've been getting recently. But again, guys, a disappointing print on second quarter gross domestic product.

MYLES UDLAND: Yeah, Emily, those residential and nonresidential structures figures really jarring to see there and I think a clear sign of how these supply shortages feeding through into economic data. All right.