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How the delta variant and supply chain problems smothered the economy's sparkle


The U.S. economy slowed down over the summer as a wave of new coronavirus infections washed over the country. The Commerce Department said this morning that U.S. GDP grew at an annual rate of 2% in July, August and September. That is down from 6.7% during the spring. NPR's Scott Horsley is following this one. Hey, Scott.


KING: So we knew the delta variant was a drag on the economy. There - no surprise there. How much of this slowdown can be blamed on the virus, and how big a deal is this?

HORSLEY: It's a big part of it. The Commerce Department says all of this slowdown in economic growth can be tied to slower growth of consumer spending, and a good deal of that was caused by the delta variant. You know, when the quarter started back around the Fourth of July, forecasters thought we'd be seeing growth similar to what it was in the spring, maybe even faster. Remember; employers added more than a million jobs between June and July. But that economic sizzle quickly fizzled once new infections and hospitalizations and deaths tied to the delta variant mounted. Here's how Mark Zandi of Moody's Analytics describes it.

MARK ZANDI: Delta did a lot of damage. I mean, it made consumers more cautious. Travel fell off. People went to restaurants less often. It rescrambled global supply chains. Delta did a real number on the economy. It really hurt.

HORSLEY: The virus also kept millions of would-be workers on the sidelines. You know, some people got sick. Some people stayed home to avoid getting sick. Some were busy looking after other ones, other people who were sick. So job growth also slowed sharply in August and September, and that was another drag on the broader economy.

KING: Mark Zandi mentioned supply chains. We have experienced the delays and the shortages, many of us out there. How are those cutting into growth?

HORSLEY: Yeah, that's been another big speed bump. The Commerce Department highlighted the drop in auto sales. And that's not because people don't want cars; it's that carmakers can't produce enough because of that shortage of semiconductors. And that's just the most high-profile example of supply chain bottlenecks that we're seeing throughout the economy. I talked to Sereta Stephens. She runs the Tackle Box 2 restaurant in Fremont, Ohio. She had a lot of crowds this summer, about double what she had last year, but she said keeping those people fed was a challenge.

SERETA STEPHENS: We're having trouble getting food - onion rings, cheese sticks. There's just stuff I can't get. If I order it today, it might be here next week, or it might be in two weeks.

HORSLEY: All sorts of businesses are wrestling with those supply challenges, and that makes the slowdown unusual. Typically, when the economy slows, it's because demand has dried up. In this case, there's still plenty of demand. People have money in their pockets, thanks in part to all that federal aid that went out. But they can't always find ways to spend it, and that's keeping a lid on growth.

KING: Today's GDP report covers July, August and September. We're almost through October now. What do you think the rest of the year looks like, Scott?

HORSLEY: Well, here there is a little bit of good news. Forecasters do expect to see stronger growth in the last three months of the year. Delta cases have fallen sharply since early September. Vaccinations are going up. Pretty soon, younger children might be eligible for the vaccine. All that should make people more comfortable about going out, spending money. There are already signs that's happening. People also may feel more comfortable going back to work if they're on the sidelines. So while Labor Day was a big letdown after the excitement of the Fourth of July, maybe Thanksgiving and Christmas will look a little bit better. But, of course, a lot will depend on the path of the pandemic.

KING: Of course. NPR chief economics correspondent Scott Horsley. Thank you, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Noel King is a host of Morning Edition and Up First.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.