Economic Growth Slows to 2% in Third Quarter
October 28, 2021
The U.S. economy grew at a pace of just 2% in the third quarter, marking the slowest period since the pandemic recovery began.
GDP growth came in well below economist expectations of 2.8%. Projections had fallen precipitously in recent months, as it became clear that ongoing supply chain disruptions and climbing prices had blunted the recovery’s momentum. When the quarter started in July, the census estimate was that the quarter would see GDP growth of 7%.
The quarter saw increases in private inventory investment, state and local government spending, nonresidential fixed investment, and a small increase in consumer spending. This was not enough, however, to offset declines in residential fixed investment and federal government spending, nor the widening U.S. trade deficit, which reached a new high in August.
Consumer spending, which accounts for nearly 70% of all economic activity, increased at just a 1.6% pace during the quarter, a dramatic slowdown from the 12% increase seen in the second quarter.
Spending on goods fell 9.2%, led by a massive 26.2% drop in spending on big-ticket items like home appliances and cars.
While supply bottlenecks and labor shortages are expected to persist until the middle of next year, economists largely expect economic growth to pick up in the fourth quarter amid strong consumer demand and falling Covid numbers, which spiked in the third quarter as the Delta variant spread throughout the nation.