U.S. economy grew at annual rate of 2% in the third quarter, as delta variant pulled back progress

The U.S. economy grew at an annual rate of 2 percent in the third quarter, in the latest sign of how the recent delta variant of the coronavirus held back the economic recovery.

The gross domestic product figures for the July-through-September period, released Thursday by the Bureau of Economic Analysis, came in far lower than the booming 6.7 percent growth in the previous quarter, reflecting an economy struggling anew amid the delta variant surge, which tore through unvaccinated communities in August and September and is only easing now.

The third quarter was the economy’s worst since the pandemic devastated the economy in the first half of 2020, as global supply chain backlogs, higher prices and labor shortages continue to bedevil the recovery.

“Ultimately this is a speed bump,” said Constance Hunter, chief economist at KPMG. “The key thing is, of course, to break this down based on supply factors versus demand factors.”

For example, the booming car sales market slowed down substantially. A drop in motor vehicle spending pulled GDP down by 2.4 percentage points, as chip shortages and persistent supply chain issues hamper the car market. A separate plunge in residential investment, which includes new home construction and renovations, also shaved 0.4 percentage points off economic growth, due to shortages of construction materials from wood frames to appliances.