Supply Chain Constraints Evident in Third Quarter GDP Data

Summary Real GDP grew only 2.0% at an annualized rate in the third quarter, which marked a significant downshift from the rate of growth that the economy posted in the first half of the year. Supply chain constraints, which are causing many prices to rise sharply and making many goods simply unavailable, were evident in the underlying details. The only saving grace was that inventories did not decline as much in the third quarter as they did in Q2. Without that positive contribution from inventories, the U.S. economy would have essentially stalled in the third quarter. Looking forward, we expect that growth will rebound, albeit not to the pace seen earlier this year, as supply chains become unglued. The need to re-stock empty shelves and continued resilience in consumer spending should underpin spending growth. But unblocking supply chains will take time. We look for the rate of consumer price inflation, which rose to a 31-year high in the third quarter, to slow next year. But we also do not think that it will recede all the way back to 2%, as some policymakers at the Federal Reserve expect. READ FULL ARTICLE>>