The U.S. economy increased at an annual rate of 2 per cent in Q3, in the latest sign of how the recent delta variant of the COVID-19 held back the economic recovery.
According to the Bureau of Economic Analysis, the gross domestic product figures (GDP) for the year’s third quarter came in far lower than the booming 6.7% growth in the previous quarter.
The third quarter was the economy’s worst since the COVID-19 pandemic hit devastated the economy in the first half of 2020. Notably, the third quarter witnessed global supply chain backlogs, higher prices, and labor shortages, which continue to bedevil the recovery.
Remarkably, the booming car sales market slowed down substantially. A drop in motor vehicle spending weighed GDP down by 2.4%. Meanwhile, chip shortages and persistent supply chain issues hamper the car market. Besides, a separate fall in residential investment, including new home construction and renovations, also dropped 0.4% off economic growth. This came amid shortages of construction materials from wood frames to appliances.
Economists Are Hopeful About the Final Stretch of 2021
As we know, the delta variant also affected peoples’ spending behaviour this past summer. Between Q2 and Q3, growth in spending on food services and accommodations slowed. This came as individuals avoided such indoor spaces and cancelled vacations.
However, the economy has more than eclipsed its pre-pandemic high after adjusting for inflation. Remarkably, the growth for the year still should approach 6% — its fastest rate in nearly four decades.
Economists are also hopeful about the final stretch of 2021. According to senior economic officials in the Biden administration, new cases are down around 60% since the peak of the delta variant increase. Meanwhile, consumer confidence is recovering with a 3.6% increase in October, after dropping all three months of Q3. Consumer spending should ramp up around the holiday season. Additionally, unemployment claims have been ticking down for about a month, falling to a new pandemic low last week.