US economy slowed in third quarter

US economic growth slowed sharply over the summer as supply-chain bottlenecks and the resurgent pandemic restrained activity at stores, factories and restaurants.

Gross domestic product, adjusted for inflation, grew 0.5% in the third quarter, the Commerce Department said Thursday. That was down from 1.6% in the second quarter, dashing earlier hopes that the recovery would accelerate as the year went on.

On an annualised basis, GDP rose 2% in the third quarter, down from 6.7% in the second quarter.

The slowdown was partly a result of the spread of the delta variant of the coronavirus, which led many Americans to pull back on travel, restaurant meals and other in-person activities. More recent data suggests that people have returned to those activities as virus cases have fallen, and most economists expect faster growth in the final three months of the year.

But another major restriction on growth may be slower to recede. The pandemic has snarled supply chains around the world, even as demand for many products has surged. The resulting backups have made it hard for US stores and factories to get the products and parts they need. Many businesses are also struggling to find enough workers to make, sell and deliver products — another supply shortage that is holding back growth longer than economists expected.

“The economy doesn’t have a demand problem,” said Ben Herzon, executive director of IHS Markit, a forecasting firm. “It has a supply problem.”

In some cases, those supply issues are resulting in delayed deliveries, reduced selection and empty shelves. In other cases, they are resulting in higher prices: Inflation soared last spring and has remained elevated. In government statistics, faster price increases result in slower inflation-adjusted growth.

Still, the economy is in much better shape than forecasters expected for most of last year. GDP returned to its prepandemic level in the second quarter, although it has not caught up to where it would be if the pandemic had never occurred.

© 2021 The New York Times Company