The weaker-than-expected growth reported by the Commerce Department on Thursday also reflected decreasing pandemic relief money from the government to businesses, state and local governments as well as households. Hurricane Ida, which devastated U.S. offshore energy production at the end of August, also restrained economic growth.
Gross domestic product increased at a 2.0% annualized rate last quarter, the government said in its advance GDP estimate. That was slowest since the second quarter of 2020, when the economy suffered a historic contraction in the wake of stringent mandatory measures to contain the first wave of coronavirus cases. The economy grew at a 6.7% rate in the second quarter.
Excluding inventories, the economy contracted a 0.1% rate last quarter. The scarcity of motor vehicles hammered consumer spending, which grew at only a 1.6% rate after a robust 12% growth pace in the April-June quarter. Consumer spending accounts for more than two-thirds of U.S. economic activity. Spending on long-lasting manufactured goods dropped at a 26.2% rate. Motor vehicles cut 2.39 percentage points from GDP growth.
But there is light at the end of the tunnel. The summer wave of COVID-19 infections is behind, with cases declining significantly in recent weeks. Vaccinations have also picked up. The improving public health and labor market conditions helped to lift consumer confidence this month.