Chronicling 100 Years of the U.S. Economy

May 2021
Volume 101, Number 5

GDP and the Economy

Advance Estimates for the First Quarter of 2021

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Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021, according to the “advance” estimates of the National Income and Product Accounts (chart 1 and table 1).1 In the fourth quarter, real GDP increased 4.3 percent. The increase in real GDP in the first quarter reflected increases in consumer spending, nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports.2 Imports, which are a subtraction in the calculation of GDP, increased (chart 2).

The acceleration in real GDP growth in the first quarter reflected the continued economic recovery from the COVID-19 pandemic as government assistance payments were distributed to households and businesses. An acceleration in consumer spending and upturns in federal as well as state and local government spending more than accounted for the acceleration in real GDP. These were partly offset by downturns in private inventory investment and exports and by decelerations in residential fixed investment and nonresidential fixed investment. Imports slowed.

  • The acceleration in consumer spending reflected an upturn in spending on goods and an acceleration in spending on services.
    • Within goods, all components of both durable and nondurable goods contributed to the upturn. The leading contributors were upturns in spending on motor vehicles and parts as well as on food and beverages purchased for off-premises consumption.
    • Within services, the leading contributors to the acceleration were upturns in spending on food services and accommodations and on transportation services.
  • An upturn in federal government spending was the second largest contributor to the acceleration in real GDP. The upturn primarily reflected an upturn in nondefense spending on intermediate goods and services purchased by government. In the first quarter, the processing and administration of Paycheck Protection Program loan applications by banks on behalf of the federal government added approximately $13.2 billion ($52.6 billion at an annual rate) to nondefense services. Federal government purchases of COVID-19 vaccines for distribution to the public contributed to the upturn in nondefense goods.
  • The upturn in state and local government spending reflected an upturn in consumption expenditures, led by compensation of employees, that was partly offset by a downturn in gross investment, led by a downturn in structures.
  • The downturn in private inventory investment was led by a larger decrease in retail trade and a downturn in manufacturing. Within retail trade, the largest contributor was a larger decrease in inventory investment by motor vehicle dealers. Within manufacturing, there were downturns in both durable and nondurable goods manufacturing inventory investment.
  • The downturn in exports reflected downturns in both goods (led by a deceleration in industrial supplies and a downturn in foods, feeds, and beverages) and services (led by a deceleration in transport and a downturn in royalties and license fees).
  • Residential fixed investment slowed, largely reflecting a slowdown in new residential structures, notably single-family units, and a downturn in brokers' commissions.
  • Nonresidential fixed investment slowed, reflecting a slowdown in investment in equipment that was partly offset by a smaller decrease in investment in structures. Investment in intellectual property products grew at about the same rate as in the fourth quarter.
    • The slowdown in equipment investment was more than accounted for by a slowdown in transportation equipment that was partly offset by an acceleration in information processing equipment.
    • The smaller decrease in structures was more than accounted for by a smaller decrease in investment in industrial structures.
  • Imports slowed. As a subtraction in the calculation of GDP, imports contributed to the acceleration in first-quarter GDP. The main contributor was a downturn in automotive vehicles, engines, and parts.

Prices for gross domestic purchases—goods and services purchased by U.S. residents—increased 3.8 percent in the first quarter after increasing 1.7 percent in the fourth quarter (table 2 and chart 3). The leading contributors to the acceleration were accelerations in the prices that consumers paid for gasoline and other energy goods and for health care services. A notable offset was in the prices that consumers paid for motor vehicles and parts.

Food prices decreased 0.1 percent in the first quarter; they were unchanged in the fourth quarter. Prices for energy goods and services increased 46.7 percent after increasing 9.1 percent. Gross domestic purchases prices excluding food and energy increased 3.1 percent after increasing 1.6 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, accelerated, increasing 2.3 percent in the first quarter after increasing 1.3 percent in the fourth quarter.

Measured in current dollars, personal income increased $2.40 trillion in the first quarter, in contrast to a decrease of $351.4 billion in the fourth quarter (table 3). The increase in personal income primarily reflected increases in personal current transfer receipts (notably, government social benefits) and compensation that were partly offset by decreases in proprietors' income and personal dividend 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 increased, primarily reflecting increases in economic impact payments and in pandemic unemployment compensation payments.
  • Within compensation, the leading contributor to the increase was private wages and salaries.
  • Within proprietors' income, a decrease in farm proprietors' income was partly offset by an increase in nonfarm proprietors' income. For farm proprietors' income, the decrease primarily reflected a decrease in payments related to the Coronavirus Food Assistance Program designed to support farmers and ranchers impacted by COVID-19.
  • The decrease in personal dividend income was based primarily on company financial data for the first quarter.

Personal current taxes increased $36.6 billion in the first quarter after increasing $50.7 billion in the fourth quarter.

Disposable personal income (DPI) increased $2.36 trillion in the first quarter after decreasing $402.1 billion in the fourth quarter. Personal outlays increased $492.8 billion after increasing $125.3 billion in the fourth quarter.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 21.0 percent in the first quarter, compared with 13.0 percent in the fourth.

Real DPI (chart 5) increased 61.3 percent in the first quarter after decreasing 10.1 percent in the fourth quarter. Current-dollar DPI increased 67.0 percent after decreasing 8.8 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 2021 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.”