A wave of COVID-19 cases, surging inflation and ebbing federal financial lifelines downshifted the pace of the US economic recovery in Q3.
The United States economy grew at a slower pace in the three months ending September, as a wave of COVID-19 cases, supply chain bottlenecks, surging inflation and ebbing federal financial lifelines downshifted the pace of the nation’s economic recovery.
US gross domestic product (GDP) which measures the value of goods and services produced by the economy, grew 2 percent in the third quarter from the same period a year ago, the US Bureau of Economic Analysis said on Thursday.
That initial reading marked a sharp slowdown from the second quarter when GDP adjusted for inflation grew 6.7 percent. The third-quarter headline number also fell short of many analysts already curbed expectations.
“A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country,” said the BEA in its press release on Thursday. “Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased.”
A sharp slowdown in consumer spending was behind the disappointing growth figures. Personal consumption grew a scant 1.6 percent on an annualized basis in the third quarter, compared to 12 percent in the second quarter.
Myriad factors are taking the wind out of the sails of US consumers, whose spending accounts for roughly two-thirds of the nation’s economic growth.
A wave of COVID-19 infections driven by the highly contagious Delta variant swept through parts of the country in the three months ending in September. Gummed up supply chains and ongoing shortages of raw materials drove prices higher for businesses, many of which in turn passed them on to consumers. And as prices climbed, many consumers had less money to spend, thanks to waning government stimulus.