The US economy may have just had its worst hit since the pandemic broke out

The country’s economic growth is expected to decline by more than half to 3.1% year-on-year between July and September, according to economists polled by The Wall Street Journal. The US expanded 6.7% year-on-year in the second quarter.

Other economic fortune-tellers say even slower growth is ahead. IHS Markit, the gold standard under Wall Street DJIA,
+0.21%
forecasters estimate that GDP is on track to grow by just 1.5%.

The Atlanta Federal Reserve’s GDPNow forecast is even weaker: 0.5%.

The big story was the increase in coronavirus cases linked to the delta variant in the third quarter.

By the end of the summer, Americans were going out and traveling less to avoid contracting the virus. That meant less spending in hotels, restaurants, theaters, resorts and the like.

The result: Consumer spending, the economy’s biggest driver, may have grown by a lukewarm 1% or less.

In contrast, spending rose by 12% year-on-year in the spring and by 11.4% in the first three months of the year.

The delta variant was not the only source of reduced spending. Massive federal government stimulus had largely dried up by the end of the third quarter. Large incentive payments to individuals and families pushed up spending earlier in the year.

Even when consumers wanted to spend more, sometimes they couldn’t find enough products to buy because of persistent labor and supply shortages that plague the economy.

Read: “My company is facing an acute shortage of workers,” the owner tells Congress

Example: new cars and trucks.

A global shortage of computer chips has slowed production and pushed prices to record highs as the US experiences its worst inflation in 30 years. Falling car sales is another major contributor to reduced consumer spending.

Read: Inflation rises 5.4% yoy in September and remains at 30-year high

“Delta, easing fiscal stimulus and supply constraints have likely limited US GDP,” economists at TD said in a note to customers.

Other factors dampening growth over the summer included record international trade deficits and flattening home sales. Builders also cannot build enough houses due to labor and material shortages.

However, there is some light at the end of the tunnel. The economy appeared to be picking up in the first month of the fourth quarter as the delta faded and Americans reverted to spending.

Read: Americans say they’ve lost faith in the economy, but they’re spending like they’ve won the lottery

Economists predict that GDP will accelerate to 4.8% in the last three months of the year.

“There are all sorts of concerns about inflation, supply chain snafus and labor shortages, but the economy continues to run quite briskly,” said Joel Naroff of Naroff Economic Advisors.

The recovery would be even faster, they say, if labor shortages and supply bottlenecks eased rapidly. Still, those problems are expected to persist well into 2022.