Chronicling 100 Years of the U.S. Economy

June 2021
Volume 101, Number 6

GDP and the Economy

Second 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 second estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 In the fourth quarter of 2020, 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 and table 1).

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, food and beverages purchased for off-premises consumption, furnishings and durable household equipment, and recreational goods and vehicles.
    • Within services, the leading contributors to the acceleration were upturns in spending on food services and accommodations, transportation services, and recreation services. These upturns were mostly offset by a downturn in spending on health care services.
  • The upturn in federal government spending primarily reflected an upturn in nondefense consumption expenditures 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 downturn in manufacturing and a larger decrease in retail trade. The downturn in manufacturing reflected downturns in both durable and nondurable goods industries. Within retail trade, the larger decrease primarily reflected a larger decrease in inventory investment by motor vehicle dealers.
  • The downturn in exports reflected downturns in both goods, led by downturns in industrial supplies and 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 downturn in brokers' commissions and a slowdown in new residential structures, notably single-family units.
  • Nonresidential fixed investment slowed, reflecting a slowdown in investment in equipment that was partly offset by an acceleration in intellectual property products and a smaller decrease in investment in structures.
    • The slowdown in equipment investment reflected a slowdown in transportation equipment that was partly offset by an acceleration in information processing equipment.
    • The acceleration in intellectual property products was more than accounted for by a pickup in software investment.
    • The smaller decrease in structures was more than accounted for by an upturn 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 3.9 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, and in the prices paid by state and local governments, notably for petroleum products. Notable offsets included a downturn in the prices that consumers paid for transportation services and motor vehicles and parts and a slowdown in prices for food services and accommodations.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Food prices decreased 0.1 percent in the first quarter; they were unchanged in the fourth quarter. Prices for energy goods and services increased 46.1 percent after increasing 9.1 percent. Gross domestic purchases prices excluding food and energy increased 3.3 percent after increasing 1.6 percent.

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, accelerated, increasing 2.5 percent in the first quarter after increasing 1.3 percent in the fourth quarter.

Personal income (table 3), which is measured in current dollars, increased $2.44 trillion, in contrast to a decrease of $203.6 billion (revised) in the fourth quarter. 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 $42.6 billion in the first quarter after increasing $78.6 billion in the fourth quarter.

Disposable personal income (DPI) increased $2.40 trillion in the first quarter after decreasing $282.2 billion in the fourth quarter. Personal outlays increased $523.0 billion after increasing $125.3 billion in the fourth quarter.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 21.4 percent in the first quarter, compared with 13.6 percent in the fourth.

Real DPI (chart 5) increased 61.7 percent in the first quarter after decreasing 7.6 percent in the fourth quarter. Current-dollar DPI increased 67.7 percent after decreasing 6.2 percent.

With the release of the second estimate of GDP, the Bureau of Economic Analysis also released revised estimates of fourth-quarter 2020 wages and salaries, personal taxes, contributions for social insurance, and gross domestic income (GDI). These estimates reflect updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages. As a result, for the fourth quarter of 2020:

  • Wages and salaries are now estimated to have increased $360.5 billion, an upward revision of $157.8 billion.
  • Personal income is now estimated to have decreased $203.6 billion, an upward revision of $147.8 billion.
  • Real DPI is now estimated to have decreased 7.6 percent; in the previously published estimate, real DPI decreased 10.1 percent.
  • The personal saving rate is now estimated at 13.6 percent; in the previously published estimate, the personal saving rate was 13.0 percent.
  • The increase in fourth-quarter real GDI (table 1) is now estimated at 19.4 percent; in the previously published estimate, real GDI increased 15.7 percent.

In the second estimate for the first quarter, real GDP increased 6.4 percent, the same rate as in the advance estimate (table 4). Upward revisions to consumer spending, nonresidential fixed investment, and residential fixed investment were offset by downward revisions to exports, private inventory investment, and state and local government spending. Imports were revised up.

  • Within consumer spending, an upward revision to goods was partly offset by a downward revision to services.
    • For goods, the revision was led by upward revisions to motor vehicles (notably, used and new light trucks) and other durable goods (notably, jewelry).
    • For services, the revision primarily reflected a downward revision to health care, led by nonprofit hospital services as well as physician services.
  • The revision to nonresidential fixed investment was more than accounted for by an upward revision to intellectual property products (both software and research and development) that was partly offset by a downward revision to equipment (notably, computers and peripheral equipment) and a downward revision to transportation equipment (notably, aircraft and light trucks).
  • The upward revision to residential investment was led by new single-family structures.
  • Within exports, the downward revision was primarily attributable to petroleum and products.
  • Within imports, the revision primarily reflected an upward revision to nondurable consumer goods, except food.
  • The revision to private inventory investment was led by downward revisions to manufacturing and information industries that were partly offset by an upward revision to wholesale trade.
  • Within state and local government spending, the revision reflected downward revisions to structures investment and employee compensation.

Measured in current dollars, profit from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) decreased $0.2 billion in the first quarter, compared with a decrease of $31.4 billion in the fourth quarter (table 5). Profits of domestic financial corporations decreased $3.6 billion in the first quarter, in contrast to an increase of $17.5 billion in the fourth quarter. Profits of domestic nonfinancial corporations increased $12.4 billion, in contrast to a decrease of $48.2 billion. Rest-of-the-world profits decreased $9.0 billion, compared with a decrease of $0.7 billion. In the first quarter, receipts increased $31.0 billion, and payments increased $40.0 billion.

Estimates of corporate profits were affected by a legal settlement paid by Boeing in the first quarter. The NIPAs record these settlements on an accrual basis in the quarter when the settlement is finalized, regardless of when they are recorded on a company's financial statement. The settlement agreement paid by Boeing totaled $2.5 billion ($10.1 billion at an annual rate) and reflected payments of $0.2 billion to the federal government, $0.6 billion to the air transportation industry, and $1.7 billion to the “rest of the world.”

Profits after tax (without IVA and CCAdj), BEA's profits measure that is conceptually most similar to the profits for companies in the Standard & Poor's 500 Index, increased $95.5 billion in the first quarter.

 


  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.”