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U.S. Economy Grew 1.6% in Second Quarter


Now a new threat is emerging in the highly contagious Delta variant of the coronavirus, which has caused cases to soar in much of the country. The Centers for Disease Control and Prevention recommended this week that even vaccinated people should wear masks indoors in some areas, and some mayors and governors have reimposed mask mandates.

Few economists expect a return to widespread business shutdowns or stay-at-home orders. But if the resurgent virus leads to renewed caution among consumers — a reluctance to dine at restaurants, hesitation about booking a late-summer getaway — that could weaken the recovery at a crucial moment.

“The reason that is concerning is that this burst of activity around reopening has been driving the economy the past couple months,” said Michelle Meyer, head of U.S. economics at Bank of America. “Even a modest change in behavior could show up more meaningfully this time around.”

Brandon Lindley is watching the Delta variant news with mounting concern. He and his husband, Raphael Polito, own retail stores in California and Arizona selling designer flip-flops and other tourism-oriented products. After a disastrous 2020, business has picked up in California this year, but they are grappling with supply-chain and labor issues, and their store in Scottsdale, Ariz., is still struggling. Business has softened since July 4, which Mr. Lindley suspects could reflect concern over the new variant.

“Everyone’s a little on edge,” he said. “They don’t know what’s coming down the pipeline.”

There is little evidence so far that either the Delta variant or inflation is making a dent in consumer demand overall. Consumer spending rose 2.8 percent in the second quarter, and more recent data from private-sector sources has yet to show a significant slowdown.

Spending on services was particularly robust in the second quarter as widespread vaccinations and falling virus cases led Americans to return to restaurants, nail salons and other in-person activities. But goods spending remained strong as well, reflecting the healthy financial position of many households after successive rounds of government aid, said Aneta Markowska, chief financial economist for Jefferies, an investment bank.

Personal income after taxes fell from the first quarter, when stimulus payments provided a temporary lift, but is still 6.4 percent above its prepandemic level after adjusting for inflation. And Americans are collectively sitting on trillions more in savings than they had before the pandemic.

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