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GDP Growth Slowed in Q3

The U.S. economy grew at a rate of just 2% in Q3, the slowest pace since the start of the pandemic, according to

Why it’s happening: Slowed economic activity is owed to supply chain backlogs and decelerated consumer spending brought about by the spread of the COVID-19 delta variant.

  • Further, “[d]eclines 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.”

What else declined: Also on the decrease in Q3 was spending on goods (9.2%), exports of goods and services (2.5%), federal government spending (4.7%) and business spending on equipment (3.2%) and structures (7.3%).

The reaction: “Overall, this is a big disappointment given that the consensus expectation at the start of the quarter in July was for a 7.0% gain, and even our own bearish 3.5% forecast proved to be too optimistic,” wrote Paul Ashworth, chief U.S. economist at Capital Economics. “We expect something of a rebound in the final quarter of this year—if only because motor vehicles won’t be such a drag and any negative impact from delta should be reversed.”

The good news: “Investments in intellectual property products were a bright spot, rising 12.2%, which should assist with productivity growth moving forward,” said NAM Chief Economist Chad Moutray.

Looking ahead: Though supply chain disruptions are almost certain to continue into 2022, Q4 spending could pick up as delta cases decline and consumers increase their spending on services that involve in-person interaction, said Dawit Kebede, senior economist at the Credit Union National Association.

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