Chronicling 100 Years of the U.S. Economy

September 2021
Volume 101, Number 9

GDP and the Economy

Second Estimates for the Second Quarter of 2021

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Real gross domestic product (GDP) increased at an annual rate of 6.6 percent in the second quarter of 2021, according to the second estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 With the second estimate, real GDP growth for the second quarter was revised up by 0.1 percentage point. In the first quarter, real GDP increased 6.3 percent.

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).

The increase in consumer spending reflected increases in services (led by food services and accommodations) and goods (led by “other” nondurable goods, notably pharmaceutical products, as well as clothing and footwear). The increase in nonresidential fixed investment reflected increases in intellectual property products (led by research and development as well as software) and equipment (led by transportation equipment). The increase in exports reflected an increase in goods (led by nonautomotive capital goods) and services (led by travel). The decrease in private inventory investment was led by a decrease in retail trade inventories. The decrease in federal government spending primarily reflected a decrease in nondefense spending on intermediate goods and services. In the second quarter, nondefense services decreased as the processing and administration of Paycheck Protection Program (PPP) loan applications by banks on behalf of the federal government declined.

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 residential fixed investment and federal government spending and a slowdown in nonresidential fixed investment. Imports slowed.

  • The smaller decrease in inventory investment primarily reflected a smaller decrease in manufacturing, an upturn in “other” industries (mainly from a smaller decrease in transportation and warehousing and a pickup in information industries), and a smaller decrease in retail trade (led by motor vehicle dealers).
  • The upturn in exports reflected upturns in both goods and services exports.
    • The leading contributors to the upturn in exports of goods were consumer goods and capital goods (nonautomotive).
    • The upturn in exports of services was led by 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 an upturn in health care and a pickup in food services and accommodations.
    • Within goods, all categories of durable goods contributed to the deceleration (led by a slowdown in motor vehicles and parts and a downturn in furnishings and durable household equipment). 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) that was partly offset by a larger decrease in gross investment.
  • All categories contributed to the downturn in residential fixed investment. The leading contributors were a slowdown in single-family construction, a downturn in improvements and a larger decrease in brokers' commissions.
  • 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 PPP loan applications by banks on behalf of the federal government slowed.
  • The slowdown in nonresidential fixed investment reflected a downturn in structures (with all categories contributing) and slowdowns in equipment (more than accounted for by a downturn in information processing equipment) and intellectual property products (more than accounted for by a slowdown in software investment).
  • The slowdown in imports reflected a deceleration in goods imports that was partly offset by an acceleration in services imports.
    • The leading contributor to the deceleration in goods imports was a downturn in imports of consumer goods (led by pharmaceuticals).
    • The acceleration in services imports primarily reflected a larger increase in travel.

Real gross domestic income, which is the sum of incomes earned and costs incurred in the production of GDP, increased 1.6 percent in the second quarter after increasing 6.3 percent in the first quarter.

Prices for gross domestic purchases—goods and services purchased by U.S. residents—increased 5.8 percent in the second quarter after increasing 3.9 percent 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). Other notable contributors include increases in the prices paid for state and local government spending 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 2.1 percent in the second quarter after decreasing 0.1 percent in the first quarter. Prices for energy goods and services increased 20.9 percent after increasing 47.8 percent. Gross domestic purchases prices excluding food and energy increased 5.6 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 $1.30 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 $138.3 billion in the second quarter. In addition to presenting updated estimates for the second quarter, the second estimate of the NIPAs included revised estimates of first-quarter personal current taxes based on updated data from the Treasury Department's Office of Tax Analysis. Personal current taxes are now estimated to have increased $152.3 billion in the first quarter.

Disposable personal income (DPI) decreased $1.44 trillion in the second quarter after increasing $2.17 trillion in the first quarter (revised). Personal outlays increased $684.9 billion after increasing $538.8 billion in the first quarter.

The personal saving rate (chart 4)—personal saving as a percentage of DPI—was 10.3 percent in the second quarter, compared with 20.5 percent in the first (revised).

Real DPI (chart 5) decreased 31.0 percent in the second quarter after increasing 54.7 percent in the first quarter (revised). Current-dollar DPI decreased 26.5 percent after increasing 60.6 percent.

 

In the second estimate for the second quarter, real GDP increased 6.6 percent, an upward revision of 0.1 percentage point from the advance estimate. The updated estimates primarily reflected upward revisions to nonresidential fixed investment, exports, and consumer spending that were partly offset by downward revisions to inventory investment, residential fixed investment, and state and local government spending. Imports were revised down.

  • Within nonresidential fixed investment, an upward revision to intellectual property products was partly offset by a downward revision to equipment.
    • For intellectual property products, the leading contributors to the upward revision were software and research and development.
    • For equipment, the leading contributor to the downward revision was computers and peripherals.
  • Within exports, both goods and services were revised up.
    • The leading contributor to the upward revision to goods exports was nondurable industrial supplies and materials.
    • The leading contributor to the upward revision to services exports was travel.
  • Within consumer spending, an upward revision to goods was mostly offset by a downward revision to services.
    • Within goods, the leading contributors to the upward revision were recreational goods and vehicles (notably, computer software and accessories) and clothing and footwear.
    • The leading contributors to the downward revision to services were “other” services (notably, legal services) as well as housing and utilities (notably, electricity and gas).
  • The revision to inventory investment was more than accounted for by a downward revision to retail inventories, notably motor vehicle dealers.
  • Within residential fixed investment, the leading contributor to the downward revision was spending on improvements.
  • The revision to state and local government spending primarily reflected a downward revision to structures investment (notably, highway and street construction).
  • Within imports, the leading contributors to the downward revision were durable industrial supplies and materials as well as “other” goods.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) increased $234.5 billion, or 9.2 percent at a quarterly rate, in the second quarter after increasing $123.9 billion in the first quarter (table 5). Profits of domestic financial corporations increased $53.7 billion, profits of domestic nonfinancial corporations increased $169.8 billion, and rest-of-the-world profits increased $11.0 billion.

Subsidies, which are a subtraction in the calculation of GDI, increased in the second quarter. Corporate profits and proprietors' income were in part bolstered by provisions from federal government pandemic response programs such as the PPP and tax credits for paid sick leave. More information on federal subsidy programs and their impacts on income measures is presented in the table “Effects of Selected Federal Pandemic Response Programs on Federal Government Receipts, Expenditures, and Saving” on BEA's website.

Estimates of corporate profits were also affected by legal settlements in the second 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. A legal settlement paid by Johnson & Johnson reduced nonfinancial corporate profits in the second quarter by $2.1 billion ($8.5 billion at an annual rate). The estimate of GDI was not impacted, because the settlement was recorded in the NIPAs as a business current transfer payment to persons, which offset the reduction in corporate profits.

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 $303.7 billion in the second 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.”