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U.S. Posts Weakest Growth of Pandemic Recovery on Supply Woes

Forex Oct 28, 2021 08:36AM ET
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(Bloomberg) -- U.S. economic growth slowed more than expected in the third quarter to the softest pace of the pandemic recovery period as snarled supply chains and a surge in Covid-19 cases throttled spending and investment.

Gross domestic product expanded at a 2% annualized rate following a 6.7% pace in the second quarter, the Commerce Department’s preliminary estimate showed Thursday. 

The deceleration reflected a sharp slowdown in personal consumption, which  grew at just a 1.6% pace after a rapid 12% jump in the prior period. Shortages, transportation bottlenecks, rising prices and the delta variant of the coronavirus weighed on both goods and services spending.

The median forecast in a Bloomberg survey of economists called for a 2.6% increase in GDP. 

The latest data underscore how unprecedented supply constraints are holding back the U.S. economy. Understaffed and short of necessary materials, producers are struggling to keep up with demand. Service providers, who face similar pressures, took an additional hit from the delta variant. 

While supply chain challenges are expected to linger well into 2022, subsiding Covid-19 infections and elevated savings should support stronger household spending in the final three months of the year. 

Persistent supply constraints paired with other reopening effects have also driven up prices for a variety of products, spurring concerns about the breadth and duration of the recent spike in inflation. 

The personal consumption expenditures price index excluding food and energy costs, followed closely by Federal Reserve officials, remained elevated last quarter. 

“We don’t see the raw material or the inflation environment slowing down in any way.” -- 3M Co. CFO Monish Patolawala, Oct. 26 earnings call

“Consistent with the broader market, we are experiencing inflation pressure... Next year we anticipate a more challenging inflation environment.” -- General Electric (NYSE:GE) Co.  CFO Carolina Dybeck Happe, Oct. 26 earnings call

“I think the headwinds and the increased distribution costs will certainly be with us into 2022.” -- Kimberly-Clark Corp (NYSE:KMB). CFO Maria Henry, Oct. 25 earnings call

“On the cost side of the equation... we do not see any meaningful improvement until well into 2022.” -- Sherwin-Williams Co (NYSE:SHW). CEO John Morikis, Oct. 26 earnings call

“The risks are clearly now to longer and more persistent bottlenecks and thus to higher inflation,” Fed Chair Jerome Powell said last week. “We now see higher inflation and the bottlenecks lasting well into next year.

 

U.S. Posts Weakest Growth of Pandemic Recovery on Supply Woes
 

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Comments (8)
Jim Scott
Jim Scott Oct 28, 2021 9:40AM ET
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Japan has been printing for years with no growth, yet the ignorant US thinks it can print for growth, and finally the data, or for those, THE SCIENCE has proven Japan right.  $5 Trillion into an economy, all asset classes are a house of cards, over inflated.  Yet, the 10 year treasury keeps falling along with the *****$VIX. Perhaps inflation isn't the upcoming issue... ??
Kaveh Sun
Kaveh Sun Oct 28, 2021 9:24AM ET
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Biden will print infinite money for prosperity. That is the left mantra.
ZS Beck
ZS Beck Oct 28, 2021 9:17AM ET
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There you go. It's proven. Can't create economic growth with money printing.
Steffen vdm
Steffen vdm Oct 28, 2021 9:15AM ET
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When are the US politicians and investors going to take their heads out of their own *****? This is going the wrong way. You can't just solve things by throwing money at it
Ferdinando Riboni
Ferdinando Riboni Oct 28, 2021 8:59AM ET
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I see thousands of homeless all over California. and the Rich Elite keep getting Richer...let's Go Brandon
Tyrone Jackson
Tyrone Jackson Oct 28, 2021 8:54AM ET
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Everything is great under the Biden administration. GDP 2%. ? Personal spending down?? Maybe the average guy can see the chaos that is around the corner and is not buying anything other than basic survival supplies. Gas and food. I bet the 2% growth is a lie too more like 1% at best. Natural gas prices have doubled all because of Biden and the liberals. Wait until the dead of winter. Europe will be freezing cold due to global warming!! Lol
Ricardo Diogo
Rcd72 Oct 28, 2021 8:52AM ET
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reduce consumption but even so even higher prices thanks Powell!! fed crushing the real economy
Filippo Bulgarini d Elci
Filippo Bulgarini d Elci Oct 28, 2021 8:42AM ET
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It's third quarter... Not second quarter... Lol
Tru Gfu
Tru Gfu Oct 28, 2021 8:42AM ET
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that is what it says?
 
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