U.S. economic growth for the third quarter is projected to have fallen to 2%, the slowest gains recorded since the start of the pandemic. Initial estimates expected the economy to have reached at least 2.7% growth in the third quarter.

On Thursday, the Commerce Department’s Bureau of Economic Analysis (BEA) released the new figures which show how the economy has been bogged down by the aftershocks of the COVID-19 pandemic. The economic recovery still has a way to go despite the injection of stimulus funds from Congress that contributed to a strong second quarter of growth.

Enduring factors like the ongoing supply chain bottlenecks, labor shortages and rising inflation all took their toll on consumption and investment. The Delta variant is another factor that was lurking in the background, prolonging the pandemic and the return to normalcy in daily life. 

The BEA found that a decrease in fixed residential investment, federal government spending for non-defense investments and the end of loan applications from the Paycheck Protection Program all brought down growth. 

Another factor was the ballooning trade deficit as U.S. exports have struggled to recover. On Wednesday, it was reported that the trade deficit had surged by 9.2%, or $96.3 billion, largely due to a drop in exports as imports grew 0.5%. 

The BEA estimates that consumer spending was up 1.6%, but spending on food and durable goods was lower than in the second quarter. Data released earlier in October showed inflation was taking a toll on these products as reflected by a decline in orders for capital goods and a Consumer Price Index report that showed a price rise for core goods like food. 

Some of the factors behind the slump in GDP growth take on added meaning because they arrive a day before the newest data for the Personal Consumption Expenditures (PCE) index is released on Friday. The PCE data will also be arriving ahead of a meeting of the Federal Reserve to discuss how the central bank will move to arrest inflation’s growth. The PCE is considered the Fed’s preferred measurement for gauging inflation. 

What helped buoy growth this quarter was the strength in the services sector, state and local government spending and an increase in nonresidential fixed investment. Previous reports similarly credit the strength of the service industry as contributing to growth and it is projected to continue into the future.