(JustPatriots.com)- US economic growth crashed in the third quarter as the economy continues to grapple with the Delta variant and the supply-chain disruptions.
Gross domestic product, the value of all goods and services produced in the United States, grew at an annualized rate of 2 percent from July through September, after adjusting for inflation and seasonality, according to data released by the Commerce Department on Wednesday.
That was below the consensus expectation for 2.9 percent growth.
During the second quarter, the economy grew at a better than expected 6.7 percent, boosted in large part by widespread business re-openings, vaccinated Americans spending more time outside the home, as well as a massive infusion of government stimulus.
By late June, analysts were initially forecasting third-quarter growth of seven to better than nine percent. But the surge in COVID cases, stronger-than-expected inflation, as well as supply bottlenecks dragged the economy down to a much slower pace.
The Personal Consumption Expenditures price index increased 5.3 percent in the third quarter, compared with an increase of 6.5 percent in the prior period. Excluding food and energy prices, the PCE price index increased 4.5 percent, compared with a second-quarter increase of 6.1 percent.
Current-dollar GDP, which is not adjusted for inflation, increased 7.8 percent at an annual rate – or $432.5 billion — in the third quarter to a level of $23.17 trillion. That was a significant slowdown from the second quarter when the economy grew at an annualized rate of 13.4 percent, or $702.8 billion.
Consumer spending increased only 1.6 percent in the third quarter. This was a big deceleration from the 12 percent rate of growth in the prior quarter. This languid consumer spending was driven by the lack of durable goods sought by consumers and a fumbled handoff from goods to consumer spending as many Americans canceled travel plans and cut back on things like eating out at restaurants due to the reintroduction of COVID mandates and restrictions.
Residential fixed investment declined, primarily driven by a decline in home improvements and single-family home construction. Despite surging home prices, home construction fell this summer as the costs of building materials and labor climbed and home builders suffered from a workers’ shortage.
Spending on household furniture and durable goods fell 0.22 percent.
The continuing shortage of semiconductors has forced some automobile manufacturers to slow production in the third quarter. Motor vehicle and parts output contracted at an annualized rate of 2.39 percent.