A truck picks up a shipping container at the Port of Savannah in Georgia. The supply chain crisis has created a backlog of nearly 80,000 shipping containers at this port, the third-largest container port in the United States, with around 20 ships anchored off the Atlantic coast, waiting to offload their cargo.
Paul Hennessy | LightRocket | Getty Images
The rate of growth for the U.S. economy slowed to its fastest pandemic-era pace in the third quarter as supply chain issues and a marked slowdown in consumer spending stunted the expansion, the Commerce Department reported Thursday.
Gross domestic product, a sum of all the goods and services produced, grew at a 2.0% annualized pace in the third quarter, according to the department’s first estimate released Thursday. Economists surveyed by Dow Jones had been looking for a 2.8% reading.
That marked the slowest GDP gain since the 31.2% plunge in the second quarter of 2020, which encompassed the period during which Covid-19 morphed into a global pandemic that resulted in a severe economic shutdown that sent tens of millions to the unemployment lines and put a chokehold on activity across the country.
Declines in residential fixed investment and federal government spending helped hold back gains, as did a surge in the U.S. trade deficit, which widened to a near-record $73.3 billion in August.
Consumer spending, which makes up 69% of the $23.2 trillion U.S. economy, increased at just a 1.6% pace for the most recent period, after rising 12% in the second quarter.
Spending for goods tumbled 9.2%, spurred by a 26.2% plunge in expenditures on longer-last goods like appliances, while services spending increased 7.9%, a pullback from the 11.5% pace in Q2.
In a separate economic report, jobless claims totaled 281,000 for the week ended Oct. 23, another pandemic-era low and better than the 289,000 estimate. The total marked a decrease from the previous week’s 291,000.
Stock market futures remained higher after the report while government bond yields also climbed.
The July-to-September period saw a major clogging of the nation’s supply chain, which in turn dampened a recovery that began in April 2020 following the shortest but steepest recession in U.S. history.
Shortages in labor and soaring demand for goods over services contributed to the bottleneck, which is not expected to ease until after the holiday season.
Despite the Q3 weakness, economists largely expect the U.S. to bounce back in the fourth quarter and continue growth into 2022.
Another significant factor for the Q3 number was the summertime rise of the Covid delta variant, a situation that has reversed itself in much of the country. Consumer activity, particularly in the vital services part of the economy, appears to have picked up and could fuel a late-year growth burst.
Companies during the current earnings season have noted the issues with supply chains, but many say customers are willing to pay higher prices. That in turn has helped fuel inflation, which is running close to its 30-year high and also is expected by most economists and Federal Reserve policymakers to cool next year.
Thursday’s data indicated that at least the pace of the inflation rise had taken a step back.
Core personal consumption expenditures, which exclude food and energy and are the preferred gauge by which the Fed measures inflation, rose 4.5%, a deceleration from the second quarter’s 6.1% increase but still well above the pre-Covid pace. The headline PCE price index increased 5.3% in Q3, down from 6.5% in the previous period.
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