Annualized third-quarter growth of real GDP in the United States was 2.0%, versus more than 6.0% in each of the first two quarters of 2021. The slowdown can be traced primarily to the emergence of the COVID-19 Delta variant and global supply-chain disruptions. The Delta variant raised concerns for personal safety, inhibiting mobility and consumer spending. Disruptions in supply chains inhibited production. A shortage of microchips, for example, suppressed motor vehicles and some electronics output. Reduced production in the motor vehicle sector alone accounted for 2.4 percentage points of the decline in real GDP growth.

The Delta variant and supply chain issues had disparate effects on third-quarter economic activity around the world. Japan, for instance, saw real GDP fall an annualized 3.0%; in the United Kingdom it was up 5.3%, while the European Union grew 3.6%; and in China, real GDP advanced 0.8%.

In spite of mixed third-quarter results, virtually all parts of the global economy have rebounded from the depths of the recession induced by the COVID-19 pandemic. However, the rebound occurred with a shift in demand away from services toward goods, leading to supply shortages, transportation bottlenecks, and skills mismatches in labor markets. The resulting price spikes in specific products have been large enough to lift inflation materially in nearly every country.


  • The COVID-19 Pandemic Threatens to Remain – Successful vaccine development has not been a panacea; vaccines do not provide complete protection and many people remain unvaccinated.
  • Inflation Has Seen a Worrisome Acceleration – Data still support the thesis that the recent increase is transitory. However, that does not mean it will end quickly, or that it cannot morph into a longer-term problem.
  • Risks in Fixed-income Investments Remain – Elevated inflation has increased the probability that interest rates will advance and result in materially adverse downward price pressure on longer-term yield instruments.
  • The Pace of Corporate Profits Has Peaked – Still, the bull market in global equities is unlikely to end until the next recession, which, in turn, is unlikely to occur in the coming year.


The third quarter’s slowdown in U.S. economic activity is a potent reminder that the course of COVID-19 can disrupt even the brightest prospects for economic growth. However, even as pockets of increased infection rates have emerged in the United States, new total infection rates remain well below the summer’s peaks. Increasing vaccination rates and limited mandatory precautionary measures should allow the mobility needed for growth in economic activity to rebound into the neighborhood of 4.3% in the fourth quarter of 2021 and 5.4% for the full year. Also, full-year real GDP should advance about 4.3% in 2022. Economic indicators point to a near-term pickup in growth. For example, the Conference Board’s Leading Economic Index shows a strong upward trend, including a 0.9% increase in October. The Institute for Supply Management’s purchasing managers indices for both manufacturing and services are well in expansion territory, with expansion now favoring services. New unemployment claims, the unemployment rate, and layoffs are trending downward, while the number of unfilled job openings exceeds the number of unemployed by a ratio of 4:3.

Global growth has been handicapped by the Delta variant, and country outlooks are mixed. Notably, Europe is encountering a new wave of COVID-19 infections, and European authorities are imposing mobility restrictions. Steps taken so far fall well short of general shutdowns; a rebound is expected to occur in early 2022. Presuming no new pandemic-related setbacks, global growth will continue, though output will remain well short of potential in the near term. International Monetary Fund projections put full year global growth at 5.9% for 2021 and 4.9% for 2022.

* The information contained within this edition of the Notes on the Economy Executive Summary is based on data released as of November 19, 2021.

To receive a full copy of the Executive Summary or the entire 24-page “Notes on the Economy” report, contact your AMG advisor or submit a request for more information.


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