Another quarter for consumers to rely on massive stimulus payments, extremely loose monetary policy, and the continued re-opening of the US economy combined to push real GDP up at a very rapid pace in the second quarter, with the federal government preparing to release its initial estimate of economic growth on July 29.
At present, we are estimating that real GDP grew at an 8.3% annual rate in Q2, an acceleration from the 6.4% growth rate in Q1 and, with the exception of the massive surge in output in the third quarter of 2020, which offset the massive plunge in production in Q2 of 2020, the fastest growth rate for any quarter since the early 1980s.
Remember, though, that much of the recent rapid growth we've seen is really just a "sugar high." Look for economic growth to slow in the second half of the year, and then even more so in 2022.
In the meantime, it's important to recognize that although rapid growth is welcome, that the economic glass remains half empty. Yes, real GDP likely hit a new all-time high. Yes, if our estimate is correct, real GDP will be up 0.7% annualized versus the last quarter of 2019, which is when we hit the previous peak in quarterly real GDP.
However, in the absence of COVID-19, the economy almost certainly would have grown faster than that pace in the meantime, which means that, even at an all-time high, real GDP is still smaller than it would have been if COVID had never happened.