US economic growth slows sharply in Q3 on supply chain woes

WASHINGTON (BLOOMBERG) – US economic growth slowed more than expected in the third quarter to the softest pace of the pandemic recovery period as snarled supply chains and a surge in Covid-19 cases throttled spending and investment.

Gross domestic product expanded at a 2 per cent annualised rate following a 6.7 per cent growth in the second quarter, the Commerce Department’s preliminary estimate showed on Thursday (Oct 28).

The median forecast in a Bloomberg survey of economists called for a 2.6 per cent increase in GDP.

The deceleration reflected a sharp slowdown in personal consumption, which grew at just a 1.6 per cent pace after a rapid 12 per cent jump in the prior period. Shortages, transportation bottlenecks, rising prices and the Delta variant of the coronavirus weighed on both goods and services spending.

The median forecast in a Bloomberg survey of economists called for a 2.6 per cent increase in GDP.

The latest data underscore how unprecedented supply constraints are holding back the US economy. Understaffed and short of necessary materials, producers are struggling to keep up with demand. Service providers, who face similar pressures, took an additional hit from the Delta variant.

While supply chain challenges are expected to linger well into 2022, subsiding Covid-19 infections and elevated savings should support stronger household spending in the final three months of the year.

Persistent supply constraints paired with other reopening effects have also driven up prices for a variety of products, spurring concerns about the breadth and duration of the recent spike in inflation.

The personal consumption expenditures price index excluding food and energy costs, followed closely by Federal Reserve officials, remained elevated last quarter.

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