By Nathalie Voit

Economic growth between July to September significantly slowed down as the spread of the Delta variant and ongoing supply bottlenecks weighed on the U.S. recovery. 

According to the U.S. Bureau of Economic Analysis, real gross domestic product (GDP) in the third quarter of 2021 increased at a seasonally adjusted annual rate of 2.0 percent, marking the weakest period of growth since the start of the recovery in mid-2020. 

A rising caseload due to the highly transmissible Delta variant of the COVID-19 virus and ongoing supply chain bottlenecks have wreaked havoc on inventory in almost every sector of the economy. In tandem with slowed vaccination rates and fewer business re-openings, factors that helped spur GDP growth to historically high levels in the first half of the year, the end of pandemic-era aid helped accelerate the already lagging economic recovery.  

The figures are a stark contrast from the second quarter, which saw GDP increase by a seasonally adjusted 6.7%, Commerce Department data revealed. Adjusted for inflation, personal consumption expenditures in the third quarter of 2021 fell 2.4% as auto dealers and other manufacturers struggled to keep inventory in stock. 

According to economists, the biggest factor currently hampering growth is the global supply-chain crisis. The supply-chain issues have proved to be worse than the spread of the Delta variant, which has begun to fade in recent weeks.  

“In some places, things may be getting worse before they get better. In some areas, they may be stabilizing before they get better,” said Robert Rosener, senior U.S. economist at Morgan Stanley, about the supply chain problems. “It’s a very mixed picture, but there’s nothing that’s signaling immediate relief.”

Nevertheless, strong spending from consumers is expected to buffer some of the fallout in growth, particularly as the country heads into the crucial holiday shopping season. 

“We had a temporary set of impediments coming from a resurgence of the coronavirus that should ease as we move through the quarters ahead,” said Carl Tannenbaum, chief economist at Northern Trust.