The US economy lost its zest in the third quarter. As reported by the Bureau of Economic Analysis (BEA) of the Department of Commerce, real GDP increased by 2% year-on-year (0.5% quarterly), after an increase of 6.7% (1, 6% in quarterly rate) in the second quarter. The consensus expected an increase of around 2.8 after lowering its projections over the past few weeks.
From the Commerce Department, they mention factors such as the resurgence of Covid-19 cases , which caused new restrictions and delays in the reopening of establishments in some parts of the country, as causes that explain the moderation in growth.
At the same time, during that quarter, government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and other social benefits to households also decreased or expired .
Of course, the advance payments of tax credits per child authorized by the American Rescue Plan of the Biden Administration, which began to be distributed between July and September, served as a cushion to offset part of the decline in social benefits to households.
The advance in the US economy in the third quarter reflected increases in investment in private inventories , personal consumption expenditures (PCE), state and local government spending or non-residential fixed investment, which were partially offset by the declines in residential fixed investment , spending by federal public administrations and exports. Imports, which remain in the GDP calculation, increased.
Although the consumer continued to show his face to maintain growth, it is true that the slowdown in GDP is explained to a greater extent by the slowdown in personal consumption spending (PCE). Overall spending advanced just 1.6% (year-on-year) compared to 12% in the second quarter, weighed down by motor vehicles, food services and accommodation. In fact, spending on goods contracted 9.2% in its interannual rate due to the sharp drop in the disbursement of durable goods (-26.2%). The debacle was moderated by consumption in nondurable goods and services.
“The current shortage of semiconductors, which is holding back vehicle production, means that we do not expect a spectacular rebound in consumption in the next two quarters,” said Paul Ashworth, chief economist at Capital Economics after reviewing this data.
In this sense, he explains that with the withdrawal of unemployment benefits throughout the quarter, real disposable personal income contracted by 5.6% (annualized) and the savings rate fell to 8.9%, from 10, 5% . This means that the savings rate has returned to its pre-pandemic level, leaving much less room for households to increase their spending, although the current rate does not take into account the savings accumulated during lockdowns.
The PCE price index increased 5.3%, compared to a 6.5% increase in the second quarter. If food and energy prices are excluded, the underlying reading increased 4.5% , compared to an increase of 6.1% registered between the months of April to June.
GDP for the third quarter of 2021 was 1.4% higher than the level of the fourth quarter of 2019. Still, BEA officials indicate that the full economic effects of the pandemic cannot yet be quantified in the estimate published this Thursday because impacts are generally integrated into the source data and cannot be separately identified.