By MARTIN CRUTSINGER

WASHINGTON (AP) — Fueled by vaccinations and government aid, the U.S. economy grew at a solid 6.5% annual rate last quarter in another sign that the nation has achieved a sustained recovery from the pandemic recession. The total size of the economy has now surpassed its pre-pandemic level.

Thursday’s report from the Commerce Department estimated that the nation’s gross domestic product — its total output of goods and services — accelerated in the April-June quarter from an already robust 6.3% annual growth rate in the first quarter of the year.

The quarterly figure was less than analysts had expected. But that was mainly because supply chain bottlenecks exerted a stronger-than-predicted drag on companies’ efforts to restock their shelves. The slowdown in inventory rebuilding, in fact, subtracted 1.1 percentage points from last quarter’s annual growth.

By contrast, consumer spending — the main fuel of the U.S. economy — was robust last quarter: It advanced at an 11.8% annual rate. Spending on goods grew at an 11.6% rate, though down from a 27.4% surge in the first quarter. And spending on services, from restaurant meals to airline tickets, expanded at a 12% rate, up from a 3.9% gain in the January-March period as vaccinations encouraged more Americans to shop, travel and eat out.

For all of 2021, the economy is expected to expand perhaps as much as 7%. If so, that would be the strongest calendar-year growth since 1984. And it would mark a sharp reversal from last year’s 3.4% economic contraction — the worst in 74 years — as a result of the pandemic.

Yet overhanging the rosy economic forecasts is the possibility of a resurgent coronavirus in the form of the highly contagious delta variant. The U.S. is now averaging more than 60,000 confirmed new cases a day, up from only about 12,000 a month ago. Should a surge in viral infections cause many consumers to hunker down again and pull back on spending, it would weaken the recovery.

For now, the economy is showing sustained strength. Last month, America’s employers added 850,000 jobs, well above the average of the previous three months. And average hourly pay rose a solid 3.6% compared with a year earlier, faster than the pre-pandemic annual pace.

“The fundamentals for consumers and businesses are still very good,” said Gus Faucher, chief economist at PNC Financial, who said he had so far seen no effects from a rise in confirmed viral cases.

Consumer confidence has reached its highest level since the pandemic struck in March 2020, a key reason why retail sales remain solid as Americans shift their spending back to services — from restaurant meals and airline trips to entertainment events and shopping sprees. Businesses are also showing renewed faith in the economy, with orders for manufactured goods pointing to solid corporate investment.

Underpinning the recovery have been trillions in federal rescue money, ranging from stimulus checks to expanded unemployment benefits to small business aid to just-distributed child tax credit payments. And millions of affluent households have benefited from a vast increase in their wealth resulting from surging home equity and stock market gains.

The economy is also receiving substantial support from the Federal Reserve. On Wednesday, the Fed reaffirmed that it will maintain its key short-term interest rate at a record low near zero to keep short-term borrowing costs low. It will also continue to buy government-backed bonds to put downward pressure on long-term loan rates to encourage borrowing and spending.

The recovery, in fact, has been so rapid, with pent-up demand from consumers driving growth after a year of lockdowns, that one looming risk is a potential spike in inflation that could get out of control. Consumer prices jumped 5.4% in June from a year ago, the sharpest spike in 13 years and the fourth straight month of sizable price jumps.

Some economists have warned that by choosing not to begin withdrawing its extraordinary support for the economy, the Fed may end up responding too late and too aggressively to high inflation by quickly jacking up rates and perhaps causing another recession.

But at a news conference Wednesday, Fed Chair Jerome Powell underscored his belief that recent inflation readings reflect price spikes in a narrow range of categories — from used cars and airline tickets to hotel rooms and auto rentals — that have been distorted by temporary supply shortages related to the economy’s swift reopening. Those shortages involve items like furniture, appliances, clothing and computer chips, among others.

Magnifying the supply bottlenecks is a rise in viral cases at transportation ports in Asia that have caused some manufacturing plants to shut down. Those bottlenecks could, in turn, continue to obstruct the flow of goods to retailers in the United States.

A shortage of workers, too, has made it harder for restaurants, retailers and many other service-industry employers to fill jobs as consumer demand surges — even employers that have been raising wages. Despite the job market’s steady gains, unemployment, at 5.9%, is still well above the 3.5% rate that prevailed before the pandemic struck. And the economy remains 6.8 million jobs short of its pre-pandemic total.

Should the economy’s shortages persist well into the future, the economy would likely struggle to maintain its current robust pace of growth.

By LISA MASCARO, KEVIN FREKING and ALAN FRAM

WASHINGTON (AP) — President Joe Biden and a bipartisan group of senators reached agreement Wednesday on a $1 trillion national infrastructure package, and the Senate appeared ready to begin consideration of the key part of the administration’s agenda. An evening test vote was possible.

Biden welcomed the accord as one that would show America can “do big things” — with the most significant long-term investments in nearly a century, he said, on par with building the transcontinental railroad or the Interstate highway system.

“This deal signals to the world that our democracy can function,” Biden said in a statement. “We will once again transform America and propel us into the future.”

Lead GOP negotiator Sen. Rob Portman of Ohio announced the deal earlier at the Capitol, flanked by four other Republican senators who have been in talks with Democrats and the White House on the bipartisan package.

“We now have an agreement on the major issues,” Portman said. “We are prepared to move forward.”

Still, the agreement only pushes the package toward consideration by the full Senate. It’s unclear if enough Republican senators will support passage, and many of them raised questions during a private lunch Wednesday. Senators were given a thick binder of briefing materials but wanted more details.

For days, senators in a bipartisan group have worked with the White House to salvage the deal, a first part of Biden’s big infrastructure agenda. Swelling to more than 700 pages, the bill includes $550 billion in new spending on public works projects.

According to a 57-page GOP summary obtained by The Associated Press, the five-year spending package would be paid for by tapping $205 billion in unspent COVID-19 relief aid and $53 billion in unemployment insurance aid some states have halted. It also relies on economic growth to bring in $56 billion.

The outcome will set the stage for the next debate over Biden’s much more ambitious $3.5 trillion spending package, a strictly partisan pursuit of far-reaching programs and services including child care, tax breaks and health care that touch almost every corner of American life. Republicans strongly oppose that bill, and may try to stop both.

Senate Majority Leader Chuck Schumer opened the Senate on Wednesday announcing a possible evening test vote, nudging talks along. It would require 60 votes in the evenly split 50-50 Senate to proceed for consideration, meaning support from both parties. That would launch a potentially days-long process.

Giving that a boost, Senate GOP leader Mitch McConnell announced late Wednesday he would vote to proceed, though whether he will support the final bill remains uncertain. The Republican negotiators met with McConnell earlier Wednesday and Portman said the leader “all along has been encouraging our efforts.”

Sen. Kyrsten Sinema of Arizona, a lead Democratic negotiator who talks often with Republicans said she expected the package would have enough support to move forward. She also said she spoke with Biden Wednesday and he was “very excited” to have an agreement.

Democrats, who have slim control of the House and Senate, face a timeline to act on what would be some of the most substantial pieces of legislation in years.

Filling in the details has become a month-long exercise ever since a bipartisan group of senators struck an agreement with Biden in June over the broad framework.

The new spending in the package dropped from about $600 billion to $550 billion, senators said, as money was eliminated for a public-private infrastructure bank and was reduced in other categories, including transit.

The package still includes $110 billion for highways, $65 billion for broadband and $73 billion to modernize the nation’s electric grid, according a White House fact sheet.

Additionally, there’s $25 billion for airports, $55 billion for waterworks and more than $50 billion to bolster infrastructure against cyberattacks and climate change. There’s also $7.5 billion for electric vehicle charging stations.

Paying for the package has been a slog throughout the talks after Democrats rejected a plan to bring in funds by hiking the gas tax drivers pay at the pump and Republicans dashed an effort to boost the IRS to go after tax scofflaws.

Along with repurposing the COVID-19 relief and unemployment aid, other revenue would come from the sale of broadcast spectrum, reinstating fees that chemical companies used to pay for cleaning up the nation’s worst hazardous waste sites and drawing $49 billion from reversing a Trump-era pharmaceutical rebate, among other sources.

The final deal could run into political trouble if it doesn’t pass muster as fully paid for when the Congressional Budget Office assesses the details. But Portman said the package will be “more than paid for.”

House Democrats have their own transportation bill, which includes much more spending to address rail transit, electric vehicles and other strategies to counter climate change.

The chairman of the House Transportation and Infrastructure Committee, Rep. Peter DeFazio, D-Ore., called the Senate’s bipartisan measure complete “crap,” during a private meeting Tuesday according to two Democrats who attended the session and spoke on condition of anonymity to describe it.

House Speaker Nancy Pelosi did not commit to supporting the package until she sees the details, but said Wednesday she’s “rooting for it.”

Pelosi said, “I very much want it to pass.”

A recent poll from The Associated Press-NORC found 8 in 10 Americans favor some increased infrastructure spending.

Senators in the bipartisan group have been huddling privately for months. The group includes 10 core negotiators, split evenly between Democrats and Republicans, but has swelled at times to 22.

Transit funding has remained a stubborn dispute, as most Republican senators come from rural states where highways dominate and public transit is scarce, while Democrats view transit as a priority for cities and a key to easing congesting and fighting climate change. Democrats don’t want to see the formula dip below its typical formula of about 80% for highways and 20% for transit.

Expanding access to broadband. which has become ever more vital for households during the coronavirus pandemic, sparked a new debate. Republicans pushed back against imposing regulations on internet service providers in a program that helps low-income people pay for service.

Sinema said transit and broadband were the remaining issues being finished up Wednesday.

Meanwhile, Democrats are readying the broader $3.5 trillion package that is being considered under budget rules that allow passage with 51 senators in the split Senate, with Vice President Kamala Harris able to break a tie. It would be paid for by increasing the corporate tax rate and the tax rate on Americans earning more than $400,000 a year.

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Associated Press writers Alan Fram and Josh Boak in Washington and Tali Arbel in New York contributed to this report.