GDP and the Economy

Third Estimates for the Second Quarter of 2023

October 5, 2023

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Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the second quarter of 2023, according to the “third” estimate of the National Income and Product Accounts (chart 1 and table 1).¹ With the third estimate, real GDP growth was the same as previously estimated from the second estimate issued in August. In the first quarter, real GDP increased 2.2 percent (revised).

Estimates have been updated based on the results of the 16th comprehensive update of the National Economic Accounts. Refer to “Comprehensive Update of the National Economic Accounts” below.

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

• The increase in nonresidential fixed investment reflected increases in structures, equipment, and intellectual property products. The increase in structures was led by manufacturing structures. The increase in equipment was led by transportation equipment, primarily reflecting increases in trucks, buses, and truck trailers as well as aircraft. The increase in intellectual property products was led by software.
• The increase in consumer spending reflected increases in both services and goods. Within services, the leading contributors to the increase were health care as well as financial services and insurance. Within goods, the increase was led by recreational goods and vehicles as well as gasoline and other energy goods.
• The increase in state and local government spending primarily reflected increases in gross investment in structures and compensation of state and local government employees.
• The increase in federal government spending primarily reflected an increase in defense spending. The increase in defense spending was led by gross investment in equipment.
• Within private inventory investment, an increase in farm inventories was offset by a decrease in nonfarm inventories. Within nonfarm, decreases in construction, mining, and utilities as well as wholesale trade were partly offset by an increase in retail trade industries.
• Within exports, a decrease in goods was partly offset by an increase in services. Within goods, the decrease was led by nondurable industrial supplies and materials; consumer goods, except food and automotive; and foods, feeds, and beverages. Within services, the increase was led by travel.
• The decrease in residential fixed investment was led by a decrease in new residential improvements that was partly offset by increases in new construction for both multifamily and single-family homes. The increase in new single-family construction was the first increase since the first quarter of 2022.
• Within imports, both goods and services decreased. Within goods, the leading contributors to the decrease were consumer goods, except food and automotive; nondurable industrial supplies and materials; and capital goods, except automotive. Within services imports, the leading contributor to the decrease was other business services.

Compared to the first quarter, the deceleration in GDP in the second quarter primarily reflected a deceleration in consumer spending, a downturn in exports, and a deceleration in federal government spending. These movements were partly offset by an upturn in inventory investment, an acceleration in business investment, and a smaller decrease in housing investment. Imports turned down.

Real gross domestic income (GDI)—the sum of incomes earned and costs incurred in the production of GDP—increased 0.7 percent at an annual rate in the second quarter, compared with an increase of 0.5 percent in the first quarter. The average of real GDP and real GDI—a supplemental measure of U.S. economic activity that equally weights GDP and GDI—increased 1.4 percent at an annual rate in the second quarter as well as in the first quarter.

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The U.S. Bureau of Economic Analysis’ (BEA’s) featured measure of inflation in the U.S. economy—the price index for gross domestic purchases (goods and services purchased by U.S. residents)—increased 1.4 percent in the second quarter after increasing 3.6 percent in the first quarter (table 2 and chart 3).

Within gross domestic purchases, food prices increased 0.1 percent in the second quarter after increasing 3.8 percent in the first quarter. Prices for energy goods and services decreased 15.6 percent after decreasing 11.4 percent. Excluding food and energy, gross domestic purchases prices increased 2.1 percent after increasing 4.1 percent.

The price index for personal consumption expenditures (PCE) increased 2.5 percent in the second quarter after increasing 4.2 percent in the first quarter. The increase in PCE prices reflected increases in prices for both services and goods.

• Within services, price increases were widespread. The leading contributors were housing and utilities (more than accounted for by housing), health care (led by hospitals), other services (led by professional and other services) as well as food services and accommodations (led by food services). Partly offsetting these increases was a decrease in transportation services (led by air transportation).
• Within goods, the leading contributors to the increase were other nondurable goods (led by pharmaceuticals) and motor vehicles and parts (led by used light trucks). These increases were partly offset by a decrease in gasoline and other energy goods (led by gasoline).

Excluding food and energy, the “core” PCE price index increased 3.7 percent in the second quarter after increasing 5.0 percent in the first quarter.

Table 2. Prices for Gross Domestic Purchases
[Percent change at annual rates; based on seasonally adjusted index numbers (2017=100)]

Line	Series	Change from preceding period (percent)				Contribution to percent change in gross domestic purchases prices (percentage points)
		2022		2023		2022		2023
		Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2
1	Gross domestic purchases1	4.7	3.8	3.6	1.4	4.7	3.8	3.6	1.4
2	Personal consumption expenditures	4.7	4.1	4.2	2.5	3.09	2.72	2.73	1.63
3	Goods	2.9	0.1	0.7	0.2	0.68	0.04	0.16	0.05
4	Durable goods	2.9	−1.6	−0.9	0.1	0.23	−0.13	−0.07	0.01
5	Nondurable goods	2.9	1.0	1.6	0.3	0.45	0.16	0.23	0.04
6	Services	5.6	6.3	6.0	3.6	2.41	2.69	2.57	1.58
7	Gross private domestic investment	6.7	2.8	3.2	−0.1	1.15	0.49	0.56	−0.02
8	Fixed investment	6.6	3.6	4.2	0.0	1.13	0.61	0.71	−0.01
9	Nonresidential	6.0	3.2	6.4	0.2	0.76	0.41	0.81	0.03
10	Structures	16.1	7.0	7.2	0.9	0.39	0.18	0.20	0.03
11	Equipment	5.6	5.9	7.9	−1.1	0.27	0.29	0.38	−0.06
12	Intellectual property products	1.7	−1.1	4.5	1.1	0.09	−0.06	0.24	0.06
13	Residential	8.4	4.9	−2.6	−0.9	0.37	0.20	−0.10	−0.03
14	Change in private inventories	---	---	---	---	0.02	−0.12	−0.15	−0.01
15	Government consumption expenditures and gross investment	2.8	3.2	1.5	−1.1	0.48	0.54	0.26	−0.18
16	Federal	4.8	4.1	4.1	2.1	0.30	0.25	0.26	0.13
17	National defense	2.9	3.6	3.3	1.9	0.10	0.13	0.12	0.07
18	Nondefense	7.5	4.7	5.2	2.3	0.20	0.13	0.14	0.06
19	State and local	1.7	2.7	0.0	−2.9	0.18	0.29	0.00	−0.31
	Addenda:
	Gross domestic purchases:
20	Food	13.6	7.2	3.8	0.1	0.66	0.37	0.20	0.00
21	Energy goods and services	−11.9	−11.9	−11.4	−15.6	−0.39	−0.40	−0.36	−0.46
22	Excluding food and energy	4.9	4.1	4.1	2.1	4.44	3.78	3.72	1.90
	Personal consumption expenditures:
23	Food and beverages purchased for off-premises consumption	12.9	7.1	3.8	0.0	---	---	---	---
24	Energy goods and services	−12.3	−10.3	−9.8	−15.6	---	---	---	---
25	Excluding food and energy	5.0	4.7	5.0	3.7	---	---	---	---
26	Gross domestic product	4.4	3.9	3.9	1.7	---	---	---	---
27	Exports of goods and services	−9.3	−5.6	0.1	−3.9	---	---	---	---
28	Imports of goods and services	−4.3	−4.3	−1.3	−4.8	---	---	---	---

1. The estimated prices for gross domestic purchases under the contribution columns are also percent changes.

Note. Most percent changes are from National Income and Product Accounts (NIPA) table 1.6.7; percent changes for personal consumption expenditures (PCE) for food and energy goods and services and for PCE excluding food and energy are from NIPA table 2.3.7. Contributions are from NIPA table 1.6.8. Gross domestic product, export, and import prices are from NIPA table 1.1.7.

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Note on Prices

Note on Prices

The U.S. Bureau of Economic Analysis' (BEA's) gross domestic purchases price index is the most comprehensive index of prices paid by U.S. residents for all goods and services, regardless of whether those goods and services were produced domestically or imported. It is derived from the prices of personal consumption expenditures (PCE), private investment, and government consumption expenditures and gross investment.

The gross domestic product (GDP) price index measures the prices of goods and services produced in the United States, including the prices of goods and services produced for export. The difference between the gross domestic purchases price index and the GDP price index reflects the differences between imports prices (included in the gross domestic purchases index) and exports prices (included in the GDP price index). For other measures that are affected by import and export prices, see the FAQ “How do the effects of dollar depreciation show up in the GDP accounts?” on BEA's website.

BEA also produces price indexes for all the components of GDP. The PCE price index is a measure of the total cost of consumer goods and services, including durable goods, nondurable goods, and services. PCE prices for food, for energy goods and services, and for all items except food and energy are also estimated and reported.

Because prices for food and for energy can be volatile, the price measure that excludes food and energy is often used as a measure of underlying, or “core,” inflation. The core PCE price index includes purchased meals and beverages, such as restaurant meals and pet food. (See “What is the core PCE price index?” on BEA's website.)

BEA also prepares a supplemental PCE price index, the “market-based” PCE price index, that is based on market transactions for which there are corresponding price measures. This index excludes many imputed expenditures, such as financial services furnished without payment, that are included in PCE and in the PCE price index. BEA also prepares a market-based measure that excludes food and energy.

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Measured in current dollars, profits from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) increased $6.9 billion, or 0.2 percent at a quarterly rate, in the second quarter. Domestic profits of financial corporations decreased $54.2 billion, domestic profits of nonfinancial corporations increased $39.0 billion, and rest-of-the-world profits (net) increased $22.1 billion in the second quarter. In the first quarter, profits decreased $83.3 billion, or 2.6 percent (table 3).

Industry profits (corporate profits by industry with IVA) increased $10.8 billion, or 0.3 percent at a quarterly rate, in the second quarter after increasing $4.0 billion, or 0.1 percent, in the first quarter (table 4 and chart 4). Domestic profits decreased $11.3 billion in the second quarter and primarily reflected decreases in financial industries 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 $21.9 billion in the second quarter after increasing $30.9 billion in the first quarter.

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The updated estimates for the second quarter primarily reflected a downward revision to consumer spending that was partly offset by upward revisions to nonresidential fixed investment, exports, and private inventory investment. Imports were revised down (table 5).

• Within consumer spending, both services and goods were revised down.
• Within services, the leading contributors to the downward revision were household utilities (both electric and gas) and transportation services (specifically motor vehicle maintenance and repair).
• Within goods, the downward revision was led by furnishings and durable household equipment as well as clothing and footwear.
• Within nonresidential fixed investment, the upward revision was led by structures. The leading contributors to the upward revision were manufacturing structures and mining exploration, shafts, and wells.
• The revision to exports primarily reflected an upward revision to services, led by travel and transport services.
• Within private inventory investment, both farm and nonfarm inventory investment were revised up. For nonfarm, the leading contributor to the upward revision was manufacturing (led by other transportation equipment, chemical manufacturing, and petroleum and coal products).
• Within imports, the downward revision was led by other business services, which includes professional and management consulting services.