Real GDP growth slowed to a moderate pace in the third quarter of 2021, as supply-chain disruptions continued, the cost of living rose, and 4.3 million workers quit their jobs.
According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.0% in the third quarter of 2021, after a 6.7% increase in the second quarter of 2021. It marked the slowest growth rate since the start of the recovery and was far below NAHB’s forecast of a 4.0% increase.
The increase in real GDP in the third quarter of 2021 reflected increases in personal consumption expenditures (PCE), private inventory investment, and state and local government spending. Meanwhile, the increase in imports, which are a subtraction in the calculation of GDP, and decreases in residential fixed investment, federal government spending, and exports had negative contributions to economic growth in the third quarter of 2021.
The deceleration in real GDP in the third quarter primarily reflected a sharp slowdown in consumer spending. Consumer spending rose at an annual rate of 1.6% in the third quarter, compared to a 12.0% increase in the second quarter. Goods spending decreased 9.2% at an annual rate, led by motor vehicles and parts (-53.9%), while expenditures on services increased 7.9% at an annual rate, mainly reflecting increases in transportation services (+41.6%).
While nonresidential fixed investment rose 1.8%, residential fixed investment (RFI) decreased 7.7% in the third quarter. The increase in nonresidential fixed investment reflected an increase in intellectual property products (+12.2%), led by software (+15.7%). The decline in residential fixed investment reflected decreases in improvements and in new single-family structures.
The decrease in exports reflected a decrease in goods and the increase in imports mainly reflected an increase in services.