U.S. posts weakest growth of pandemic recovery on supply woes

U.S. economic growth slowed more than expected in the third quarter to the softest pace of the pandemic recovery period as snarled supply chains and a surge in COVID-19 cases throttled spending and investment.

U.S. economic growth slowed more than expected in the third quarter to the softest pace of the pandemic recovery period as snarled supply chains and a surge in COVID-19 cases throttled spending and investment.

Gross domestic product expanded at a 2 per cent annualized rate following a 6.7 per cent pace in the second quarter, the Commerce Department’s preliminary estimate showed Thursday. 

The deceleration reflected a sharp slowdown in personal consumption, which  grew at just a 1.6 per cent pace after a rapid 12 per cent jump in the prior period. Shortages, transportation bottlenecks, rising prices and the delta variant of the coronavirus weighed on both goods and services spending.

The median forecast in a Bloomberg survey of economists called for a 2.6 per cent increase in GDP. U.S. stock index futures held gains, while the dollar and Treasuries were steady.

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, took an additional hit from the delta variant. 

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.