Chronicling 100 Years of the U.S. Economy

August 2021
Volume 101, Number 8

GDP and the Economy

Advance Estimates for the Second Quarter of 2021

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Real gross domestic product (GDP) increased at an annual rate of 6.5 percent in the second quarter of 2021, according to the “advance” estimates of the National Income and Product Accounts (chart 1 and table 1).1 In the first quarter, real GDP increased 6.3 percent (revised).

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

Real GDP accelerated slightly in the second quarter of 2021 as the economic recovery from the COVID-19 pandemic continued. A smaller decrease in inventory investment, an upturn in exports, an acceleration in consumer spending, and an upturn in state and local government spending were mostly offset by downturns in federal government spending and residential fixed investment and a slowdown in nonresidential fixed investment. Imports slowed.

  • The smaller decrease in inventory investment reflected smaller decreases in manufacturing (of both nondurable and durable goods) and in retail trade (led by motor vehicle dealers), and upturns in “other” industries (mainly transportation and warehousing) and in mining, utilities, and construction.
  • The upturn in exports reflected upturns in both goods and services exports.
    • The leading contributors to the upturn in goods exports were consumer goods and capital goods (nonautomotive).
    • The upturn in exports of services primarily reflected an upturn in charges for the use of intellectual property.
  • The acceleration in consumer spending reflected an acceleration in spending on services that was partly offset by a deceleration in spending on goods.
    • Within services, the leading contributors to the acceleration were a pickup in food services and accommodations and an upturn in health care.
    • Within goods, all categories of durable goods contributed to the deceleration (led by motor vehicles and parts). A slowdown in spending on nondurable goods also contributed and was more than accounted for by a slowdown in food and beverages purchased for off-premises consumption (groceries).
  • The upturn in state and local government spending reflected an acceleration in consumption expenditures, led by compensation of employees, and a smaller decrease in gross investment, led by a smaller decrease in structures.
  • The downturn in federal government spending primarily reflected a downturn in spending on nondefense consumption expenditures, led by intermediate goods and services purchased. In the second quarter, the fees associated with processing and administration of Paycheck Protection Program loan applications by banks on behalf of the federal government slowed.
  • All categories contributed to the downturn in residential fixed investment. The leading contributors were a downturn in other structures (reflecting a downturn in improvements and a larger decrease in brokers' commissions) and a slowdown in single-family construction.
  • The slowdown in nonresidential fixed investment reflected a downturn in structures (with most categories contributing) and slowdowns in intellectual property products (more than accounted for by a slowdown in software investment) and equipment (more than accounted for by a downturn in information processing equipment).
  • The slowdown in imports reflected a deceleration in goods imports that was partly offset by an acceleration in services imports.
    • The leading contributors to the deceleration in goods imports was a downturn in imports of consumer goods.
    • The acceleration in services imports primarily reflected a larger increase in travel.

Prices for gross domestic purchases—goods and services purchased by U.S. residents—increased 5.7 percent in the second quarter after increasing 3.9 percent (revised) in the first quarter (table 2 and chart 3). Increases were widespread across most expenditure components and led by prices paid by consumers, most notably for motor vehicles (primarily “net purchases of used motor vehicles,” which reflects dealer margins and net transactions between persons and other sectors of the economy), and housing and utilities. Other notable contributors include increases in the prices paid for state and local government consumption expenditures and residential fixed investment. A notable offset was a decrease in the prices paid for investment in transportation equipment.

Chart 3. Prices for Gross Domestic Purchases

[Click chart to expand]

Food prices increased 2.0 percent in the second quarter after decreasing 0.1 percent in the first quarter. Prices for energy goods and services increased 20.6 percent after increasing 47.8 percent. Gross domestic purchases prices excluding food and energy increased 5.5 percent after increasing 3.2 percent.

Consumer prices excluding food and energy, a measure of the “core” rate of inflation, increased 6.1 percent in the second quarter after increasing 2.7 percent in the first quarter.

Measured in current dollars, personal income decreased $1.32 trillion in the second quarter, in contrast to an increase of $2.33 trillion in the first quarter (table 3). The decrease in personal income primarily reflected a decrease in personal current transfer receipts (notably, government social benefits) that was partly offset by increases in compensation and 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 decreases in direct economic impact payments to households established by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, and a decrease in pandemic unemployment compensation payments.
  • Within compensation, both private and government wages and salaries increased.
  • The increase in proprietors' income reflected increases in both farm and nonfarm industries and an increase in Paycheck Protection Program loans to businesses impacted by the COVID-19 pandemic.

Personal current taxes increased $108.7 billion in the second quarter after increasing $59.0 billion in the first quarter.

Disposable personal income (DPI) decreased $1.42 trillion in the second quarter after increasing $2.27 trillion in the first quarter. Personal outlays increased $680.8 billion after increasing $538.8 billion in the first quarter.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 10.9 percent in the second quarter, compared with 20.8 percent in the first.

Real DPI (chart 5) decreased 30.6 percent in the second quarter after increasing 57.6 percent in the first quarter. Current-dollar DPI decreased 26.1 percent after increasing 63.7 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.”