GDP and the Economy

Third Estimates for the First Quarter of 2020

Real gross domestic product (GDP) decreased at an annual rate of 5.0 percent in the first quarter of 2020, 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 first quarter was unrevised from the second estimate issued last month (see “Updates”). In the fourth quarter of 2019, real GDP increased 2.1 percent.

The decrease in real GDP in the first quarter reflected negative contributions from consumer spending, inventory investment, exports, and nonresidential fixed investment that were partly offset by positive contributions from residential fixed investment and government spending.2 Imports, which are a subtraction in the calculation of GDP, decreased (chart 2 and table 1).

With the exception of residential fixed investment, all GDP components contributed to the downturn in real GDP in the first quarter. Imports decreased more in the first quarter than in the fourth quarter.

  • Consumer spending turned down, reflecting a downturn in spending on services and a slowdown in spending on goods.
    • The largest contributors to the downturn in services were health care, food services and accommodations, and recreation services, as “stay-at-home” orders to protect against COVID-19 affected both the availability of and demand for services in these categories (see “Impact of the Coronavirus (COVID-19) Pandemic on the First-Quarter 2020 GDP Estimate”).
    • Within goods, the main contributors to the slowdown were downturns in motor vehicles and parts and in clothing and footwear. Notable offsets included upturns in food and beverages purchased for off-premises consumption (groceries) and in other nondurable goods (mainly a larger increase in spending on pharmaceuticals).
  • The larger decrease in inventory investment reflected a larger decrease in nonfarm inventory investment. The main contributors to the larger decrease in nonfarm inventory investment were downturns in nondurable goods manufacturing (led by petroleum and coal products) and in nondurable goods wholesale trade (let by petroleum and petroleum products). A notable offset was an upturn in retail trade (more than accounted for by motor vehicles and parts dealers).
  • The downturn in exports reflected a downturn in exports of services, led by travel.
  • Within nonresidential investment, equipment investment decreased more in the first quarter than in the fourth quarter, primarily reflecting a larger decrease in transportation equipment and a downturn in information processing equipment.
  • The smaller increase in government spending primarily reflected downturns in state and local consumption expenditures and in federal defense gross investment.
  • The larger increase in residential fixed investment reflected accelerations in both improvements and new housing units.
  • The larger decrease in imports reflected a downturn in services, led by a downturn in travel and a larger decrease in transport services.

Prices for gross domestic purchases, goods and services purchased by U.S. residents, increased 1.7 percent in the first quarter after increasing 1.4 percent in the fourth quarter (table 2 and chart 3). The larger increase reflected accelerations in the prices paid for state and local government spending, for inventory investment, and for nonresidential fixed investment, which were partly offset by a deceleration in prices paid for consumer spending.

Food prices increased 3.2 percent after increasing 0.4 percent. Prices for energy goods and services turned down, decreasing 5.8 percent in the first quarter after increasing 4.7 percent in the fourth quarter. Gross domestic purchases prices excluding food and energy increased 1.8 percent in the first quarter after increasing 1.3 percent in the fourth quarter.

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 1.7 percent in the first quarter after increasing 1.3 percent in the fourth quarter.

Real GDP decreased 5.0 percent in the first quarter of 2020, the same decrease as in the second estimate (table 3). The revision reflected upward revisions to nonresidential fixed investment and government spending that were offset by downward revisions to private inventory investment, exports of goods, and consumer spending on durable goods.

  • The upward revision to nonresidential fixed investment was mainly to investment in structures, notably power and communication structures.
  • The upward revision to government spending was to investment in structures.
  • The downward revision to exports of goods primarily reflected downward revisions to automotive vehicles and parts and to foods, feeds, and beverages.
  • Within consumer spending, the downward revision primarily reflected a downward revision to services, led by financial services and “other” services (mainly social services and religious activities). These downward revisions were partly offset by an upward revision to spending by nonprofit institutions on behalf of households for health care services.
  • Within private inventory investment, wholesale trade and nondurable goods manufacturing inventories were the largest contributors to the downward revision.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation (IVA) adjustment and the capital consumption adjustment) decreased $262.8 billion, or 12.3 percent at a quarterly rate, in the first quarter of 2020 after increasing $53.0 billion, or 2.6 percent, in the fourth quarter of 2019 (table 4). Profits of domestic financial corporations decreased $37.5 billion, profits of domestic nonfinancial corporations decreased $181.8 billion, and rest-of-the-world profits decreased $43.5 billion.

Profits after tax decreased $235.9 billion in the first quarter after increasing $39.6 billion in the fourth quarter.

Industry profits (corporate profits by industry with IVA) decreased $227.4 billion, or 10.7 percent at a quarterly rate, in the first quarter of 2020 after increasing $49.4 billion, or 2.4 percent, in the fourth quarter (table 5).




  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.”