Supply chain snarl ups weigh on US economy

Severe supply chain breakdowns and a resurgence in Covid-19 infections have clamped down on US economic growth.

The American economy grew at an annualised rate of two per cent in the three months to September, the Commerce Department said today.

The weak growth rate came in below economists’ forecasts of 2.7 per cent.

Supply chains buckling under the weight of red hot demand triggered by economies around the world emerging from Covid-19 restrictions led to endemic shortages in the American economy, putting downward pressure on production.

A paucity of materials has also fuelled inflationary pressures, prompting firms to scale back output to rein in losses.

 A global shortage of semiconductors prompted spending on motor vehicles in the US to plummet 70 per cent. 

Meanwhile, an uptick in Covid-19 cases driven by the Delta variant worsened labour shortages, intensifying supply chain disruption.

Paul Ashworth, chief US economist at Capital Economics, said: “This is a big disappointment given that the consensus expectation at the start of the quarter in July was for a seven per cent gain and even our own bearish 3.5 per cent forecast proved to be too optimistic.”

“We expect something of a rebound in the final quarter of this year – if only because motor vehicles won’t be such a drag and any negative impact from Delta should be reversed.”