Chronicling 100 Years of the U.S. Economy

October 2020
Volume 100, Number 10

GDP and the Economy

Third Estimates for the Second Quarter of 2020

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Real gross domestic product (GDP) decreased at an annual rate of 31.4 percent in the second quarter of 2020, according to the third estimates of the National Income and Product Accounts (chart 1 and table 1).1 With the third estimate, real GDP growth for the second quarter was revised up 0.3 percentage point from the second estimate issued last month (see “Updates”). In the first quarter of 2020, real GDP decreased 5.0 percent.

The decrease in real GDP in the second quarter reflected negative contributions from consumer spending, exports, nonresidential fixed investment, inventory investment, residential fixed investment, and state and local government spending that were partly offset by a positive contribution from federal government spending.2 Imports, which are a subtraction in the calculation of GDP, decreased (chart 2 and table 1).

With the exception of federal government spending, all GDP by expenditure components contributed to the larger decrease in real GDP in the second quarter. Imports decreased more in the second quarter than in the first quarter.

  • Consumer spending decreased more in the second quarter than in the first, reflecting a larger decrease in spending on services and a downturn in spending on goods.
    • Within services, the main contributors to the larger decrease were health care (mainly hospitals and outpatient services), food services and accommodations (led by spending on purchased meals and beverages), and recreation services (led by spending on membership clubs, sports centers, parks, theaters, and museums), as “stay-at-home” orders to protect against COVID-19 affected both the availability of and demand for services in these categories (see “Impact of the Coronavirus (COVID-19) Pandemic on the Second-Quarter 2020 GDP Estimate”).
    • Within goods, the main contributors to the downturn were a downturn in spending on food and beverages purchased for off-premises consumption, a larger decrease in spending on gasoline and other energy goods, and a slowdown in spending on other nondurable goods (more than accounted for by pharmaceutical products). Notable offsets to the downturn in goods included an upturn in motor vehicles and parts and an acceleration in spending on recreational goods and vehicles.
  • Exports decreased more in the second quarter than in the first quarter, reflecting larger decreases in exports of both goods and services.
    • The larger decrease in goods exports reflected larger decreases in nonautomotive capital goods and in automotive vehicles, engines, and parts and a downturn in industrial supplies and materials (primarily petroleum and related products).
    • Larger decreases in travel services and transport services led the larger decrease in exports of services.
  • Nonresidential fixed investment decreased more in the second quarter than in the first quarter; all subcomponents contributed to the larger decrease.
    • The larger decrease in equipment primarily reflected larger decreases in transportation equipment, other equipment (mainly mining and oilfield machinery, furniture and fixtures, and construction machinery excluding tractors), and industrial equipment. A notable offset to these decreases was an upturn for investment in information processing equipment (mainly computers and peripheral equipment), as many businesses shifted to virtual and remote operations in response to the COVID-19 pandemic.
    • The larger decrease in structures investment was led by a sharp downturn in mining exploration, shafts, and wells.
    • Investment in intellectual property products turned down, with all subcomponents contributing.
  • The downturn in residential fixed investment primarily reflected downturns in single-family structures and in brokers' commissions and other ownership transfer costs.
  • The larger decrease in inventory investment primarily reflected a downturn in retail trade (led by motor vehicle and parts dealers) that was partly offset by an upturn in nondurable goods manufacturing (mainly reflecting an upturn in petroleum and coal product manufacturing).
  • The larger increase in government spending was led by a larger increase in federal nondefense consumption expenditures, which in turn reflected payments to lending institutions for administering loans provided through the Paycheck Protection Program. For additional details, see ““How does the Paycheck Protection Program of 2020 impact the national income and product accounts (NIPAs)?
  • Imports decreased more in the second quarter than in the first quarter, reflecting larger decreases in imports of both goods and services.
    • The larger decrease in imports of goods primarily reflected a larger decrease in imports of automotive vehicles, engines, and parts.
    • The larger decrease in imports of services was led by larger decreases in both travel and transport services.

Real gross domestic income decreased 33.5 percent in the second quarter after decreasing 2.5 percent in the first quarter.

For the first time, the third estimate of GDP includes estimates of GDP by industry, or value added—a measure of an industry's contribution to GDP. Private goods-producing industries decreased 34.4 percent in the second quarter, and private services-producing industries decreased 33.1 percent. Government decreased 16.6 percent (table 2 and charts 3 and 4).

  • Within private goods-producing industries, the leading contributor to the decrease was durable goods manufacturing (led by motor vehicles, bodies and trailers, and parts).
Chart 3. Real GDP by Sector: Percent Change from Preceding Period

[Click chart to expand]

  • Within private services-producing industries, the leading contributors to the decrease were accommodation and food services (led by food services and drinking places); health care and social assistance (led by ambulatory health care); transportation and warehousing (led by air transportation); arts, entertainment, and recreation; wholesale trade; and professional, scientific, and technical services. Offsetting these decreases was an increase in finance and insurance (led by securities and banking industries).
  • The decrease in government was more than accounted for by a decrease in state and local government that was partly offset by an increase in federal government.

Gross output by industry—principally a measure of an industry's sales or receipts, which includes sales to final users in the economy (GDP by expenditure) and sales to other industries (intermediate inputs)—decreased 29.5 percent in the second quarter. Private services-producing industries decreased 32.6 percent, private goods-producing industries decreased 29.7 percent, and government decreased 7.6 percent (table 3 and chart 5). Overall, 20 of 22 industry groups contributed to the decrease in real gross output; only gross output for finance and insurance and for federal government increased.

Chart 5. Real Gross Output by Sector: Percent Change from Preceding Period

[Click chart to expand]

  • Within private goods-producing industries, the industry with the largest decrease was mining, which decreased 55.2 percent at an annual rate.
  • Within private services-producing industries, the industries with the largest decrease were arts, entertainment, and recreation, which decreased 95.6 percent; accommodation and food services, which decreased 84.3 percent; and transportation and warehousing, which decreased 64.9 percent.
  • The 7.6 percent decrease in real gross output for the government sector reflected a 17.7 percent decrease in real gross output for state and local government that was partially offset by an 18.5 percent increase for real gross output of federal government.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, decreased 1.4 percent in the second quarter after increasing 1.4 percent in the first quarter (table 4 and chart 6). Downturns in the prices paid for consumer spending and for state and local government spending were partly offset by an acceleration in prices paid for investment in intellectual property products.

Food prices increased 15.7 percent after increasing 3.2 percent. Prices for energy goods and services decreased 45.7 percent in the second quarter after decreasing 7.0 percent in the first quarter. Gross domestic purchases prices excluding food and energy turned down, decreasing 0.8 percent in the second quarter after increasing 1.6 percent in the first quarter.

Chart 6. Prices for Gross Domestic Purchases

[Click chart to expand]

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, turned down, decreasing 0.8 percent in the second quarter after increasing 1.6 percent in the first quarter.

Real GDP decreased 31.4 percent in the second quarter of 2020, an upward revision of 0.3 percentage point from the second estimate (table 5). The revision reflected an upward revision to consumer spending that was partly offset by downward revisions to exports and to business investment in intellectual property products.

  • The upward revision to consumer spending was due to services and was partly offset by a downward revision to goods.
    • The upward revision to services primarily reflected upward revisions to other services (notably, personal care), recreation (notably, casino gambling), and health care (notably, nursing home services). A downward revision to transportation services (notably, motor vehicle maintenance and repair) partly offset the upward revisions to other services components.
    • Gasoline and energy goods led the downward revision to goods.
  • Exports of both goods and services were revised down.
    • The leading contributor to the downward revision to goods was industrial supplies and materials (notably, petroleum exports).
    • The leading contributors to the downward revision to services were charges for the use of intellectual property as well as telecommunications, computer, and information services.
  • The downward revision to business investment in intellectual property products was led by research and development.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment) decreased $208.9 billion, or 10.3 percent at a quarterly rate, in the second quarter of 2020 after decreasing $276.2 billion, or 12.0 percent, in the first quarter of 2020 (table 6). Profits of domestic financial corporations increased $26.5 billion, profits of domestic nonfinancial corporations decreased $145.9 billion, and rest-of-the-world profits decreased $89.5 billion.

Profits after tax decreased $190.1 billion in the second quarter after decreasing $219.5 billion in the first quarter.

Industry profits (corporate profits by industry with IVA) decreased $209.2 billion, or 10.2 percent at a quarterly rate, in the second quarter of 2020 after decreasing $241.4 billion, or 10.5 percent, in the first quarter (table 7).

 

 

 


  1. “Real” estimates are in chained (2012) dollars, and price indexes are chain-type measures. Each GDP estimate for a quarter (advance, second, and third) incorporates increasingly comprehensive and improved source data; for more information, see “The Revisions to GDP, GDI, and Their Major Components” in the January 2018 Survey of Current Business. Quarterly estimates are expressed at seasonally adjusted annual rates, which reflect a rate of activity for a quarter as if it were maintained for a year.
  2. In this article, “consumer spending” refers to “personal consumption expenditures,” “inventory investment” refers to “change in private inventories,” and “government spending” refers to “government consumption expenditures and gross investment.”