Here’s the good news on the economy: as tens of millions of Americans got vaccinated in the spring, consumer spending rose, hiring picked up, and government relief money gave a successful boost to the nation’s bottomline. The economy grew by 6.5% in the second quarter. While that number is below expectations, it means economic output in the U.S. eclipsed its pre-pandemic high, after adjusting for inflation.

America is on the move again, and today’s new GDP numbers put our economy back at pre-pandemic levels.

Make no mistake: this growth is no accident, it’s a direct result of our efforts to deliver economic relief to families, small businesses, and communities across the country.

— President Biden (@POTUS) July 29, 2021

“That is a remarkable achievement, exactly a year after the economy’s worst quarterly contraction on record,” explains The New York Times. “After the last recession ended in 2009, G.D.P. took two years to rebound fully.”

“The economy has come roaring back faster than people expected,” Jay Bryson, chief economist at Wells Fargo Corporate and Investment Bank, told The Wall Street Journal.

US economy grew 6.5% in Q2, below expectations but enough to mark a full recovery to pre-pandemic levels

What drove growth?
Big surge in consumer spending
State/local gov $$

What hurt?
Home building
No more stimulus checkshttps://t.co/37tr51Qb04 by @rachsieg @andrewvandam

— Heather Long (@byHeatherLong) July 29, 2021

Then there’s the bad news. Bloomberg explains:

Looking ahead, economic growth will be challenged by waning government support and lingering supply and labor constraints. At the same time, the rapidly spreading delta variant of Covid-19 present risks to the spending outlook.

A resurgence of COVID-19 might force the government to impose new lockdowns or restrictions on businesses, which would be a body blow to the job market and give consumers fewer opportunities to spend their pent-up savings.

Supply chain shortages are still a major impediment, as companies struggle to restock their inventories. “The slowdown in inventory rebuilding, in fact, subtracted 1.1 percentage points from last quarter’s annual growth,” according to The Associated Press.

Inventories can't go down much more (are there any left???) So that could mean stronger growth in Q3. BUT, without inventories relieving demand pressures it could also mean more imports and/or higher prices.

— Jason Furman (@jasonfurman) July 29, 2021

Inflation in the form of higher prices is also a concern, although the Federal Reserve thinks it’s under control. From NPR:

On Wednesday, after the Federal Reserve’s two-day meeting, Chair Jerome Powell again maintained that these increases are a result of pandemic disruptions to the economy and will be short-lived or “transitory.”

Others are not so sure. Some economists worry that inflation could prove harder to reverse if Americans and businesses start to expect that prices will be high — and act accordingly.