GDP and the Economy

Third Estimates for the First Quarter of 2024

July 8, 2024

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Real gross domestic product (GDP) increased at an annual rate of 1.4 percent in the first quarter of 2024, according to the “third” estimate of the National Income and Product Accounts (NIPAs) (chart 1 and table 1).¹ With the third estimate, real GDP growth was revised up 0.1 percentage point from the “second” estimate issued in May. In the fourth quarter of 2023, real GDP increased 3.4 percent.

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

• The increase in consumer spending reflected an increase in services that was partly offset by a decrease in goods.
• Within services, the leading contributors to the increase were health care (both out-patient services and hospital and nursing home services) as well as financial services and insurance (mainly banking and other financial services).
• Within goods, spending on both durable and nondurable goods decreased. The leading contributors to the decrease were motor vehicles and parts as well as gasoline and other energy goods.
• The increase in residential fixed investment was led by brokers' commissions and other ownership transfer costs and new single-family construction.
• The increase in nonresidential fixed investment primarily reflected an increase in intellectual property products. The increase was led by software (prepackaged software) and research and development (business).
• The increase in state and local government spending primarily reflected an increase in compensation of state and local government employees.
• The increase in exports reflected an increase in services (led by telecommunications, computer, and information services) that was partly offset by a decrease in goods (led by industrial supplies and materials, notably nondurable goods).
• The decrease in private inventory investment was led by decreases in wholesale trade and manufacturing.
• The decrease in federal government spending primarily reflected a decrease in defense spending. The leading contributor to the decrease in defense spending was gross investment in equipment (mainly aircraft).
• The increase in imports reflected increases in both goods and services. The leading contributors to the increase in goods were capital goods, except automotive; industrial supplies and materials; and consumer goods, except food and automotive. Within services, the increase was led by transport.

Compared to the fourth quarter of 2023, the deceleration in real GDP in the first quarter primarily reflected decelerations in consumer spending, exports, and state and local government spending and a downturn in federal government spending. These movements were partly offset by an acceleration in residential fixed investment. Imports accelerated.

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 first quarter, private goods-producing industries decreased 1.1 percent, private services-producing industries increased 1.9 percent, and government increased 2.3 percent (chart 3 and table 2). Overall, 15 of 22 industry groups contributed to the first-quarter increase in real GDP (chart 4).

• Within private goods-producing industries, the leading contributors to the decrease were durable-goods manufacturing (led by primary metals) and nondurable-goods manufacturing (led by petroleum and coal products). These decreases were partly offset by an increase in construction.
• Within private services-producing industries, the leading contributors to the increase were retail trade (led by motor vehicle and parts dealers), finance and insurance (led by Federal Reserve banks, credit intermediation, and related activities), and health care and social assistance (led by ambulatory health care services).
• The increase in government reflected increases in both state and local as well as federal government spending.

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Real gross output—principally a measure of an industry's sales or receipts, which includes sales to final users in the economy (GDP) and sales to other industries (intermediate inputs)—increased 2.5 percent in the first quarter (chart 5 and table 3). Private goods-producing industries increased 1.2 percent, private services-producing industries increased 3.1 percent, and government increased 1.7 percent. Overall, 14 of 22 industry groups contributed to the increase in real gross output.

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The U.S. Bureau of Economic Analysis' (BEA's) featured measure of inflation for the U.S. economy, the price index for gross domestic purchases (goods and services purchased by U.S. residents), increased 3.1 percent in the first quarter after increasing 1.9 percent in the fourth quarter (chart 6 and table 4).

Within gross domestic purchases, food prices increased 2.0 percent in the first quarter after increasing 1.4 percent in the fourth quarter. Prices for energy goods and services decreased 1.3 percent after decreasing 2.9 percent. Excluding food and energy, gross domestic purchases prices increased 3.3 percent after increasing 2.1 percent.

The price index for personal consumption expenditures (PCE) increased 3.4 percent in the first quarter after increasing 1.8 percent in the fourth quarter. The increase in PCE prices reflected an increase in prices for services that was partly offset by a decrease in prices for goods.

• Within services, price increases were widespread. The leading contributors were housing and utilities (led by housing), financial services and insurance (mainly banking and other financial services), and health care (led by hospitals).
• Within goods, the leading contributor to the decrease was gasoline and other energy goods (led by motor vehicle fuels, lubricants, and fluids).

Excluding food and energy, the “core” PCE price index increased 3.7 percent in the first quarter, following an increase of 2.0 percent in the fourth quarter.

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In the third estimate of the first quarter, the growth rate in real GDP was revised up 0.1 percentage point from the second estimate (table 5). The updated estimates primarily reflected a downward revision to imports and upward revisions to nonresidential fixed investment and state and local government spending that were partly offset by a downward revision to consumer spending.

• For imports, both services and goods were revised down.
• The revision to services primarily reflected a downward revision to travel that was partly offset by an upward revision to transport.
• The revision to goods was led by “other goods” as well as durable consumer goods, except food and automotive.
• The revision to nonresidential fixed investment primarily reflected upward revisions to structures and equipment.
• For structures, the revision was led by manufacturing.
• The revision to equipment was led by transportation equipment (notably, railroad equipment).
• The revision to state and local government spending reflected an upward revision to investment in structures.
• Within consumer spending, both services and goods were revised down.
• For services, the revision primarily reflected downward revisions to “other services” (led by international travel) and transportation services (led by motor vehicle maintenance and repair).
• For goods, the downward revision was led by gasoline and other energy goods.

Measured in current dollars, profits from current production (corporate profits with the inventory valuation adjustment (IVA) and the capital consumption adjustment (CCAdj)) decreased $47.1 billion, or 1.4 percent at a quarterly rate, in the first quarter (table 6). Domestic profits of financial corporations increased $65.0 billion, domestic profits of nonfinancial corporations decreased $114.5 billion, and rest-of-the-world profits (net) increased $2.3 billion. In the fourth quarter, profits increased $133.5 billion, or 4.1 percent.

Estimates of corporate profits were reduced by several settlements that were finalized in the first quarter. Settlements are recorded in the NIPAs on an accrual basis in the quarter when the settlement is finalized, regardless of when they are recorded on a company's financial statement. In the first quarter:

• Paper manufacturer 3M and chemical makers Chemours, DuPont de Nemours, and Corteva reached settlements with U.S. local governments in the amount of $10.3 billion ($41.2 billion at an annual rate) and $1.2 billion ($4.7 billion at an annual rate), respectively, over contaminated water claims.
• Diesel engine manufacturer Cummins agreed to pay $1.7 billion ($6.7 billion at an annual rate) in penalties for alleged violations of the Clean Air Act and California law.

The estimate of gross domestic income (GDI) was not impacted, because these settlements were recorded in the NIPAs as business current transfer payments to government, which offset the reduction to corporate profits.

Industry profits (corporate profits by industry with IVA) increased $38.7 billion, or 1.0 percent at a quarterly rate, in the first quarter of 2024 after increasing $140.5 billion, or 3.9 percent, in the fourth quarter of 2023 (chart 7 and table 7). Domestic profits increased $36.4 billion in the first quarter, reflecting an increase in financial industries that was partly offset by a decrease in nonfinancial industries (led by 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 $71.9 billion in the first quarter after increasing $78.5 billion in the first quarter.

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