US GDP growth slowed sharply in third quarter

US economic growth slowed sharply to an annual rate of 2pc in the third quarter, reflecting a resurgence in Covid-19 cases and associated restrictions, reduced government assistance and supply chain constraints.

Growth in gross domestic product in the quarter slowed from a rate of 6.7pc in the second quarter, the Bureau of Economic Analysis (BEA) said in the first of three estimates of quarterly growth. Consumer spending grew at a 1.6pc rate in the third quarter, slowing sharply from 12pc in the second quarter.

Last year's sharp but short recession slashed GDP by 31pc in the second quarter at the peak of Covid-19 restrictions, but that was followed by a 34pc rebound in the third quarter of 2020 on economic reopenings. That has been followed by four quarters of single-digit growth amid labor and supply bottlenecks and, in recent months, reduced government relief spending and the spread of the Delta variant and associated counter-measures.

The rolling seven-day average of Covid-19 cases in the US surged from less than 12,000 a day in late June to more than 160,000 cases a day in early September, according to Center for Disease Control and Prevention data. Infections have since dropped to about 68,000 cases a day amid vaccine mandates and approvals for children.

A 26pc decrease in spending on durable goods in the third quarter largely reflected falling purchases of automobiles and parts because of shortages of semiconductors and other supplies, BEA said. Non-durable goods spending rose by 2.6pc. Spending on services rose by 7.9pc following growth of 11.5pc in the second quarter.

Gross private domestic investment rose at an 11.7pc rate, following a decline of 3.9pc in the prior quarter. Residential investment fell by 7.7pc.

Exports fell by 2.5pc while imports rose by 6.1pc.

Government consumption and investment rose by 0.8pc. Federal non-defense spending fell by 9.2pc after a decline of 10.7p in the second quarter and a gain of 41pc in the first quarter.

By Robert Willis