Economic growth slowed sharply over the summer as supply-chain bottlenecks and the resurgent pandemic restrained activity at stores, factories and restaurants.
Gross domestic product, adjusted for inflation, grew 0.5 percent in the third quarter, the Commerce Department said Thursday. That was down from 1.6 percent in the second quarter, dashing earlier hopes that the recovery would accelerate as the year went on.
On an annualized basis, G.D.P. rose 2 percent in the third quarter, down from 6.7 percent in the second quarter.
The slowdown was partly a result of the spread of the Delta variant of the coronavirus, which led many Americans to pull back on travel, restaurant meals and other in-person activities. More recent data suggests that people have returned to those activities as virus cases have fallen, and most economists expect significantly faster growth in the final three months of the year.
But another major restriction on growth may be slower to recede. The pandemic has snarled supply chains around the world, even as demand for many products has surged. The resulting backups have made it hard for U.S. stores and factories to get the products and parts they need. Economists initially expected the disruptions to be short-lived, but many now expect the issues to linger into next year.
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$20
trillion
Level the economy was on track
to reach before the pandemic.
15
Trendline of
1st qtr. 2015 to
4th qtr. 2019
10
Gross domestic product
Adjusted for inflation and
seasonality, at annual rates
5
0
’15
’16
’17
’18
’19
’20
’21
$20
trillion
Level the
economy was
on track to
reach before
the pandemic.
15
Trendline of
1st qtr. 2015 to
4th qtr. 2019
Gross domestic product
Adjusted for inflation and
seasonality, at annual rates
10
5
0
’15
’16
’17
’18
’19
’20
’21
Many businesses are also struggling to find enough workers to make, sell and deliver products — another supply shortage that is holding back growth longer than economists expected.
“The economy doesn’t have a demand problem,” said Ben Herzon, executive director of IHS Markit, a forecasting firm. “It has a supply problem.”
In some cases, those supply issues are resulting in delayed deliveries, reduced selection and empty shelves. In other cases, they are resulting in higher prices: Inflation soared last spring and has remained elevated. In government statistics, faster price increases result in slower inflation-adjusted growth: Consumers are spending just as much, but getting less in return.
The combination of faster inflation and slower growth is causing headaches for the Federal Reserve, which has indicated it expects to being pulling back support for the economy as early as next month. It is also a political problem for President Biden as he tries to push his longer-term economic agenda through Congress.
Still, the economy is in much better shape than forecasters expected for most of last year. Gross domestic product returned to its prepandemic level in the second quarter, although it has not caught up to where it would be if the pandemic had never occurred. Government aid, along with reduced spending during the pandemic, has left Americans flush with cash, which should support spending for the rest of the year.
“Supply chain disruptions together with Delta conspired to hold back growth,” said Constance L. Hunter, chief economist for KPMG, the accounting firm. “It’s a speed bump not a slowdown.”
Source: Economy - nytimes.com
