New York (CNN Business)This summer, the American economic recovery hit a roadblock.
The US economy grew at an annualized rate of only 2% in the third quarter, the Bureau of Economic Analysis reported Thursday. The highly infectious Delta variant of the coronavirus, supply chain chaos, worker shortages and higher prices weighed on economic activity.It was far lower than the 2.7% economists had predicted and the slowest pace of growth since the start of the recovery, as well as a massive step down from the 6.7% rate in the spring.
Aside from the monumental downturn in the first half of 2020, when the economy ground to a halt amid lockdowns, it was also the worst quarterly performance since the final quarter of 2020, when GDP grew at a pace of 1.9%.
The slowdown was “more than accounted for” by a slowdown in consumer spending, according to the BEA.Read MoreAlthough American incomes rose $47.8 billion on the back of higher wages, even as government benefits wound down, disposable income actually fell by 0.7%, or $29.4 billion.The savings rate also came down to 8.9%, compared with 10.5% in the second quarter. In principle that’s a good thing, because it helps the economy when people spend rather than save. But over the summer, consumers also spent less.Americas spent less on goods — particularly cars — as well as services, with restaurants and hotels feeling it the most, as consumers got nervous about being around others amid the rising Delta cases.
The frenzy in the car market, meanwhile, has been a hallmark of the recovery: New cars were in short supply due to shortages of chips and parts, so Americans bought used cars like never before, driving up prices and snapping up all the used vehicles available. But the buying spree slowed over the summer and is now showing up in the GDP.This is a developing story. It will be updated
Source: edition.cnn.com