WASHINGTON: The US economic expansion slowed dramatically in the third quarter to an annual rate of just 2 per cent, as consumer spending slowed amid resurgent Covid-19 infections, an official of the government said on Thursday.

The spread of the Delta variant of Covid-19 over the summer combined with renewed restrictions and global supply snags including a shortage of workers took a toll on the economy, slowing growth from the 6.7 per cent annual rate in the prior quarter.

The impact was most notable in the more than 26 per cent collapse in purchases of big-ticket manufactured goods in the latest three months, the Commerce Department reported.

The drop was partly offset by the 7.9 per cent increase in spending on services, though that was slower than the gain in the prior quarter, according to the data.

The report said the “resurgence of Covid-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country”.

“[The] government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased.”

But there was some good news as inflation as measured by the personal consumption expenditures PCE price index retreated in the July-September period to show a 5.3 per cent increase compared to 6.5 per cent in the second quarter.

Excluding the volatile food and energy prices that have been spiking amid surging demand and supply bottlenecks, the closely watched inflation gauge fell to 4.5 per cent.

GDP growth compared to the second quarter edged up 0.5 per cent, less than one-third the pace of the prior three months, the report said.