Supply chain bottlenecks and rising COVID-19 cases caused U.S. economic growth to sputter in the third quarter.
The confluence of those and other factors (including rising prices and the diminishing impact from the fiscal stimulus) caused consumer spending to plummet between July and September.
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Gross domestic product (GDP) grew a paltry 0.5%, equivalent to a 2% annualized rate. That's less than one-third of the 6.7% growth rate in the second quarter of 2021.
Meanwhile, personal consumption increased at a 1.6% rate. Between April and June, it accelerated 12%.
Per Bloomberg:
The latest data underscore how unprecedented supply constraints are holding back the U.S. economy. Understaffed and short of necessary materials, producers are struggling to keep up with demand. Service providers, who face similar pressures, fared better than manufacturers during the quarter despite the pickup in infections.
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.
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“Looking ahead, we see a stronger pace of growth in the fourth quarter on a rebound in household spending, albeit with downside risk from supply chain dislocations and shortages that could be a constraint for the economic expansion over coming months,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note.
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.
A Department of Labor report, also released Thursday, showed that jobless claims dropped to a pandemic low of 281,000. However, they remain well above where they were before 2020's nationwide economic shutdown. (RELATED: CNBC Hosts Struggle to Make Sense of Disappointing Jobs Report)
