Economic growth rate slows to 2% on a sharp slowdown in consumer spending

According to the Commerce Department, the U.S. economy experienced a 2.2% increase in third quarter. This was the slowest growth since the pandemic-era recovery. Supply chain issues and a significant deceleration of consumer spending hampered the expansion. According to the department's initial estimate, the gross domestic product (a total of all goods and services produced) grew by 2.0% annually in the third quarter. Dow Jones had expected a reading of 2.8% according to economists. This was the slowest increase in GDP since the 31.2% plunge during the second quarter 2020. That period encompassed Covid-19's transformation into a global pandemic, which sent millions of people to unemployment and a chokehold on activity in the country.
Gains were held back by declines in residential fixed investments and federal spending. In August, the U.S. trade gap grew to an all-time high of $73.3 billion. These drops were mostly offset by increases in private inventor investment. There was a modest gain in personal consumption and state and local government spending, but no increase in nonresidential fixed investments. After rising by 12% in Q2, consumer spending, which accounts for 69% of the U.S. economy's $23.2 trillion, grew at a mere 1.6% rate during the most recent quarter. The 9.2% drop in goods spending was due to a 26.2% decline in the expenditures on longer-lasting goods such as appliances and autos. Services spending however increased 7.9%, which is a decrease from Q2's 11.5% pace. This was due to a 0.7% drop in disposable income. This is in spite of the government's end-of-government stimulus payments. Personal savings rates fell 8.9% from 10.5%. The Commerce Department stated that the 4.7% drop in federal government spending was due to a halt to services and processing of the Paycheck Protection Program. This is a pandemic-era program designed to provide bridge funding for businesses affected by the shutdown. Paul Ashworth, Chief U.S. Economist at Capital Economics, stated that "Overall, it is a huge disappointment given the consensus expectation at July's start for a 7.0% increase and even our bearish 3.5% forecast proved too optimistic." We expect a rebound in this final quarter, if only motor vehicles won't become such a drag. Any negative effect from Delta should be reversed. A separate economic report showed that the weekly total of jobless claims was 281,000 for the week ending Oct. 23. This is a pandemic-era low, and higher than the 289,000 estimate. This was a decrease of 291,000 from the previous week. Continuing claims dropped by 237,000 to 2.24 Million, while those who are receiving benefits from all programs fell by 448.386 to 2.83 Million.