A wave of COVID-19 cases, surging inflation and the ebb in federal financial lifelines slowed the pace of economic recovery in the United States in the third quarter.
The United States economy grew at a slower pace in the three months ending in September, as a wave of COVID-19 cases, supply chain bottlenecks, an outbreak of l Inflation and the ebb of federal financial lifelines have slowed the pace of the country’s economic recovery.
U.S. gross domestic product (GDP), which measures the value of goods and services produced by the economy, rose 2% in the third quarter compared to the same period a year ago, the U.S. Department of Justice said on Thursday. Trade.
This first reading marked a marked slowdown from the second quarter, when inflation-adjusted GDP rose 6.7%. The overall third quarter figure was also below the expectations of many analysts.
“Overall, this is a big disappointment considering that the consensus expectation at the start of the quarter in July was of a 7.0% gain and even our own bearish forecast of 3.5% went down. proved too optimistic, ”said Capital Economics chief economist Paul Ashworth. in a note to customers.
A sharp slowdown in consumer spending is behind the disappointing growth figures. Personal consumption grew only 1.6% on an annualized basis in the third quarter, compared to 12% in the second quarter.
A myriad of factors take the breath away of American consumers, whose spending accounts for about two-thirds of the country’s economic growth.
A wave of COVID-19 infections driven by the highly contagious Delta variant swept parts of the country in the three months ending in September. Clogged supply chains and persistent shortages of raw materials have driven up prices for companies, many of which in turn have passed on to consumers. And as prices rose, many consumers had less money to spend, thanks to declining government stimulus packages.
Shortages and downward pressure
As economies around the world reject COVID-related restrictions, supplies of many raw materials cannot keep up with demand. These shortages are exposed in the country’s ports where there are many safeguards and in the latest GDP data.
A global semiconductor shortage, for example, has taken a heavy toll on US auto manufacturing. This, in turn, appeared in the data under the consumption of durable goods – that is, goods designed to last three years or more.
Consumption of durable goods fell 26.2% in the third quarter, after rising 11.6% in the second quarter.
“This drop was entirely due to a massive 70% annual drop in motor vehicle consumption,” said Ashworth, who added that he did not expect a “dramatic rebound in consumption over the past two years. coming quarters “because of the continued shortage of chips.
Shortages of raw materials and labor have resulted in higher input prices for businesses, many of which pass these increases on to consumers.
While some purchases can be postponed, essentials like food, energy and shelter cannot be postponed. Rents are on the rise, thanks to a booming US real estate market driven by low interest rates. Food prices are rising due to rising input costs and energy prices are rising, thanks to a global energy crisis.
This could take a heavy toll on US consumers as winter approaches, with retail prices for natural gas, fuel oil, propane and electricity set to hit multi-year highs.
Low-income households will feel the pain most keenly because inflation further eats away at their total income.
But workers currently hold the upper hand in the US labor market. A record 4.3 million Americans left their jobs in August, and the number of job postings – 10.4 million that month – is near all-time highs.
Some 51 percent of small business owners said they had vacancies they couldn’t fill in September, according to the National Federal of Independent Businesses.
This has translated into bigger paychecks for workers. The average hourly wage in September was up 4.6% from the same period a year ago. But it has not kept pace with inflation. Consumer prices that same month rose 5.4 percent on an annualized basis.