Chronicling 100 Years of the U.S. Economy

November 2020
Volume 100, Number 11

GDP and the Economy

Advance Estimates for the Third Quarter of 2020

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Real gross domestic product (GDP) increased at an annual rate of 33.1 percent in the third quarter of 2020, according to the advance estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 In the second quarter of 2020, real GDP decreased 31.4 percent.

The increase in real GDP in the third quarter reflected increases in consumer spending, inventory investment, exports, nonresidential fixed investment, and residential fixed investment that were partly offset by decreases in federal government spending and state and local government spending.2 Imports, which are a subtraction in the calculation of GDP, increased (chart 2 and table 1).

With the exception of federal government spending, all GDP components contributed to the upturn in real GDP in the third quarter. Imports turned up strongly.

  • Consumer spending was the main contributor to the upturn in real GDP, reflecting strong upturns in spending on both services and goods.
    • The upturns in services were widespread, as “stay-at-home” orders to protect against the spread of COVID-19 eased in many parts of the United States (see “Impact of the Coronavirus (COVID-19) Pandemic on the Third-Quarter 2020 GDP Estimate”). The largest contributors to the upturn 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).
    • The largest contributors to the upturn in spending on goods were upturns in clothing and footwear and in gasoline and other energy goods, as well as larger increases in “other” durable goods (mainly jewelry and watches and therapeutic appliances and equipment) and motor vehicles and parts (mainly new light trucks).
  • Exports turned up, reflecting an upturn in exports of goods and a smaller decrease in exports of services.
    • The upturn in goods exports primarily reflected upturns in automotive vehicles, engines, and parts and in nonautomotive capital goods.
    • A smaller decrease in travel and an upturn in transport services were the leading contributors to the smaller decrease in exports of services.
  • Inventory investment turned up, primarily reflecting an upturn in retail trade (led by motor vehicle and parts dealers) that was partly offset by a downturn in nondurable goods manufacturing (mainly petroleum and coal product manufacturing and chemical manufacturing).
  • Nonresidential fixed investment turned up in the third quarter, primarily reflecting an upturn in spending on equipment. Investment in structures and intellectual property products decreased less in the third quarter than in the second quarter.
    • The upturn in equipment primarily reflected an upturn in transportation equipment (mainly light trucks).
    • The smaller decrease in structures investment was led by a smaller decrease in mining exploration, shafts, and wells.
    • The smaller decrease in intellectual property products reflected a smaller decrease in research and development, an upturn in software investment, and a smaller decrease in entertainment, literary, and artistic originals.
  • Residential investment turned up, primarily reflecting upturns in “other” structures (mainly brokers' commissions and other ownership transfer costs) and in new single-family structures.
  • State and local government spending decreased less in the third quarter than in the second quarter, primarily reflecting a smaller decrease in consumption expenditures that was more than accounted for by an upturn in employee compensation.
  • Federal government spending turned down in the third quarter, reflecting a downturn in nondefense intermediate services purchased, as the costs associated with the processing and administration of Paycheck Protection Program loan applications by banks on behalf of the federal government turned down.
  • The upturn in imports reflected upturns in both goods and services, as international trade rebounded in the third quarter after being severely curtailed in the second quarter due to the COVID-19 pandemic.
    • The upturn in imports of goods was led by an upturn in imports of automotive vehicles, engines, and parts.
    • The upturn in imports of services was led by upturns in both travel and transport services.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, increased 3.4 percent in the third quarter after decreasing 1.4 percent in the second quarter (table 2 and chart 3). The leading contributors to the upturn were upturns in the prices paid for consumer spending and for state and local government spending and a larger increase in prices for residential fixed investment.

Food prices decreased 1.8 percent in the third quarter after increasing 15.7 percent in the second quarter. Prices for energy goods and services increased 27.8 percent after decreasing 45.7 percent. Gross domestic purchases prices excluding food and energy turned up, increasing 3.2 percent after decreasing 0.8 percent.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, turned up, increasing 3.5 percent in the third quarter after decreasing 0.8 percent in the second quarter.

Measured in current dollars, personal income decreased $540.6 billion in the third quarter, in contrast to an increase of $1.45 trillion in the second quarter (table 3). The decrease in personal income was more than accounted for by a decrease in government social benefits that was partly offset by increases in employee compensation and nonfarm proprietors' income. The addenda lines in table 3 include detail on the effects of selected federal pandemic response programs on personal income.

  • Within government social benefits, “other” social benefits and unemployment insurance decreased primarily reflecting the expiration of one-time economic impact payments to individuals authorized by federal recovery legislation, including the Coronavirus Aid, Relief, and Economic Security Act, and supplemental pandemic unemployment compensation payments. These decreases were partly offset by lost wage supplemental payments from the Federal Emergency Management Administration program that took effect in the third quarter providing wage assistance to individuals impacted by the pandemic.
  • Within compensation, the leading contributor to the increase was private wages and salaries, mainly in services-producing industries. Government wages and salaries also increased.
  • Within proprietors' income, the increase was largely in nonfarm. Payments from the Paycheck Protection Program, which provided small nonfarm businesses with forgivable loans, were $297.1 billion in the third quarter, which followed initial payments of $209.1 billion that took effect in the second quarter.

Personal current taxes increased $96.1 billion in the third quarter after decreasing $156.7 billion in the second quarter.

Disposable personal income (DPI) decreased $636.7 billion in the third quarter after increasing $1.60 trillion in the second quarter. Personal outlays increased $1.29 trillion after decreasing $1.51 trillion in the second quarter.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 15.8 percent in the third quarter; in the second quarter, the personal saving rate was 25.7 percent.

Real DPI (chart 5) decreased 16.3 percent in the third quarter after increasing 46.6 percent in the second quarter. Current-dollar DPI decreased 13.2 percent after increasing 44.3 percent.

 


  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.”