While the U.S. economy has shown signs of recovery, the latest reports show the third quarter experienced the slowest expansion in over a year, with consumer spending taking a hit. On Wednesday, the Bureau of Economic Analysis released its first estimate of Q3 gross domestic product (GDP), with growth at 2% quarter-over-quarter, annualized, compared to the 2.6% initially expected.
This is the slowest GDP increase since 2020’s second-quarter dip of 32.2%—reflecting the pandemic’s global impact and the economic shutdown that followed.
“The increase in third quarter GDP reflected the continued economic impact of the COVID-19 pandemic. A resurgence of COVID-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country,” stated the GDP report. “Government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the third quarter because the impacts are generally embedded in source data and cannot be separately identified.”
Consumer spending, which makes up 69% of the U.S. economy, increased at just a 1.6% pace in the third quarter—a walk back from the second quarter’s 12% increase.
“Following several quarters of a robust economic recovery, the pace of activity slowed in the third quarter as household spending growth on durable goods declined—most notably for motor vehicles—while spending on services remained stronger,” said Mike Fratantoni, Mortgage Banker Association SVP and chief economist in a statement. “This distinction highlights the supply chain issues that continue to bedevil the economy. Consumers are willing and able to spend, but the goods are just not available. That description certainly includes the housing market, as residential investment declined again for the quarter, a witness to builders’ ongoing struggles to obtain key construction inputs.
“Of note, the PCE deflator in the third quarter was increasing at 5.3% rate, with prices for goods rising at a 7.3% rate,” added Fratantoni. “This is further evidence of the inflationary pressures impacting the broader economy.”
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.
