US economic growth slows sharply in third quarter

US financial progress slowed significantly within the third quarter as a result of supply-chain disruptions, a resurgence of Covid-19 and slower shopper spending.

The world’s largest financial system expanded 2 per cent on an annualised foundation within the three months to the top of September, in accordance with information from the commerce division on Thursday, marking the weakest quarterly progress for the reason that coronavirus recession final yr.

That was beneath expectations for a 2.7 per cent rise, in accordance with a Refinitiv ballot of economists, and represented a slowdown from the 6.7 per cent tempo within the second quarter.

Gross home product rose 0.5 per cent in contrast with the earlier quarter, based mostly on a measure utilized by different main economies.

Flagging consumption was a key offender for the financial system’s newest smooth patch, as shopper spending rose simply 1.6 per cent.

Tens of millions of US households obtained stimulus cheques from the federal authorities between mid-March and early April, which helped underpin the upper spending that drove financial progress throughout the spring as nationwide Covid-19 circumstances started to ease and states started to roll again their pandemic restrictions.

The rise of the extra infectious Delta variant that started in direction of the top of the June quarter, nonetheless, had a dampening impact on consumption and confidence over the summer season.

So-called high-frequency information, monitoring actions like restaurant eating, air passenger journey and lodge stays advised “households have been far much less inclined to exit and about, which additionally meant much less spending,” in accordance with James Knightley, chief worldwide economist at ING.

Provide-chain disruptions and shortages of virtually every thing from semiconductors to employees, precipitated largely by the pandemic, represented different challenges to progress. These elements have additionally been feeding into rising inflation, which in flip poses a danger to shopper spending and confidence by the erosion of buying energy.

The US shopper value index rose 5.4 per cent in September from a yr earlier, hovering round its highest stage since 2008.

Jay Powell, Federal Reserve chair, has taken the view that inflationary pressures will ease over time, however has acknowledged that the severity of supply-chain disruptions have exacerbated value pressures and caught policymakers without warning.

On the Fed’s most up-to-date assembly in September, Powell indicated that the US financial system would most likely be on a agency sufficient footing to permit the central financial institution to in November start decreasing the size of its $120bn-a-month asset buy programme. Some Fed officers see the opportunity of elevating rates of interest from their present rock-bottom stage as early as subsequent yr.

However a number of economists suppose the general slowdown in financial progress will most likely be momentary, despite the fact that inflationary pressures could stick round a bit longer.

Kevin Cummins, chief US economist at NatWest, stated he remained “constructive” on the outlook for home progress regardless of expectations for the slowdown within the September quarter.

“In our opinion, sturdy job good points and an elevated financial savings charge . . . will proceed to supply customers with a sizeable cushion of obtainable funds for spending in coming quarters,” he stated.


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