Chronicling 100 Years of the U.S. Economy

October 2021
Volume 101, Number 10

GDP and the Economy

Third Estimates for the Second Quarter of 2021

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Real gross domestic product (GDP) increased at an annual rate of 6.7 percent in the second quarter of 2021, according to the third estimates of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).1 With the third estimate, real GDP growth for the second quarter was revised up 0.1 percentage point from the second estimate issued last month (see “Updates”). In the first quarter of 2021, 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 private 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 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 upturns in transportation and warehousing and in agricultural services, forestry, and fisheries), 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 upturns in charges for the use of intellectual property and “other” business services.
  • 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 slowdowns in motor vehicles and parts and furnishings and durable household equipment).
  • 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 Paycheck Protection Program 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 2.3 percent in the second quarter after increasing 6.3 percent in the first quarter.

The third estimate of GDP includes estimates of GDP by industry, or value added—a measure of an industry's contribution to GDP. In the second quarter, private goods-producing industries increased 4.7 percent, private services-producing industries increased 7.8 percent, and government increased 3.4 percent (table 2). Overall, 19 of 22 industry groups contributed to the second-quarter increase in real GDP.

  • The increase in private goods-producing industries primarily reflected increases in nondurable goods manufacturing (led by petroleum and coal products), construction, and durable goods manufacturing (led by other transportation equipment).
Chart 3. Real GDP by Sector: Percent Change from Preceding Period

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  • The increase in private services-producing industries primarily reflected increases in accommodation and food services; information (led by data processing, internet publishing, and other information services); professional, scientific, and technical services; real estate and rental and leasing; and health care and social assistance (led by ambulatory health care services). These increases were partly offset by a decrease in retail trade (led by motor vehicle and parts dealers) (table 13).
  • The increase in government mainly reflected an increase in state and local government.

Gross output by industry—principally a measure of an industry’s sales or receipts, which includes sales to final users in the economy (GDP by expenditure) and sales to other industries (intermediate inputs)—increased 5.5 percent in the second quarter. Private services-producing industries increased 9.5 percent, while private goods-producing industries decreased 2.5 percent, and government decreased 1.6 percent (table 16). Overall, 14 of 22 industry groups contributed to the increase in real gross output.

Chart 5. Real Gross Output by Selected Industries: Percent Change from Preceding Period

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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 4 and chart 6). The pickup mainly reflected widespread accelerations in consumer prices for both services and goods. Notable exceptions include decelerations in the prices paid for gasoline and other energy goods and for health care.

Food prices increased in the second quarter after decreasing slightly in the first quarter. Prices for energy goods and services increased 21.2 percent after increasing 47.8 percent. Gross domestic purchases prices excluding food and energy increased 5.6 percent after increasing 3.2 percent.

Chart 6. Prices for Gross Domestic Purchases

[Click chart to expand]

In the third estimate for the second quarter, real GDP increased 6.7 percent, an upward revision of 0.1 percentage point from the previously reported estimate. The revision primarily reflected upward revisions to consumer spending, exports, and private inventory investment that were partly offset by an upward revision to imports and a downward revision to residential fixed investment.

  • Within consumer spending, both services and goods were revised up.
    • Within services, the leading contributors to the upward revision were health care (notably, outpatient services), “other” services (notably, personal care and clothing services), and transportation services (notably, air transportation). The upward revisions were partly offset by a downward revision to financial services and insurance (notably, service charges and fees as well as portfolio management and investment advice services).
    • Within goods, the leading contributor to the upward revision was food and beverages purchased for off-premises consumption (groceries).
  • The upward revision to exports primarily reflected an upward revision to services (led by “other” business services, including financial services).
  • Within private inventory investment, upward revisions to retail trade (notably, general merchandise stores) and wholesale trade (notably, petroleum and petroleum products) were partly offset by a downward revision to “other” industries (specifically information).
  • Within imports, both goods and services were revised up.
    • For goods, the leading contributor to the upward revision was industrial supplies and materials (notably, petroleum and related products).
    • For services, the leading contributor was an upward revision to transport (notably, passenger air transport).
  • Within nonresidential fixed investment, a downward revision to intellectual property products (research and development as well as software) was offset by upward revisions to structures (notably, manufacturing structures) and to equipment (notably, computers and peripheral equipment).

Measured in current dollars, profits from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) increased $267.8 billion, or 10.5 percent at a quarterly rate, in the second quarter of 2021 after increasing $123.9 billion, or 5.1 percent, in the first quarter (table 6). Profits of domestic financial corporations increased $52.8 billion, profits of domestic nonfinancial corporations increased $221.3 billion, and rest-of-the-world profits decreased $6.2 billion.

Profits after tax increased $232.9 billion in the second quarter after increasing $95.8 billion in the first quarter.

Industry profits (corporate profits by industry with IVA) increased $285.9 billion, or 11.6 percent at a quarterly rate, in the second quarter of 2021 after increasing $104.7 billion, or 4.4 percent, in the first quarter (table 7 and chart 7). The increase was led by increases in “other” nonfinancial industries (more than accounted for by mining), financial, and manufacturing.

Profits after tax (without IVA and CCAdj)—BEA's profits measure that is conceptually most like the profits for companies in the Standard & Poor's 500 Index—increased $322.8 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 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.”