BEA Leaves First Quarter 2021 GDP Growth Unchanged At 6.4%

In their second estimate of the US GDP for the first quarter of 2021, the Bureau of Economic Analysis (BEA) reported that the US economy was growing at a +6.40% annual rate, essentially unchanged (up 0.01 percentage points (pp) from their previous estimate) and up 2.08pp from the prior quarter.

Although the headline number was unchanged, the line items contributing to that headline did move around a little. Consumer spending on goods was revised upward +0.40 percentage points, and spending on fixed investments increased +0.19pp. Offsetting those gains were decreasing inventories, government spending, exports, and imports.

In an earlier release, annualized household disposable income was revised $391 higher than in the previous report, and the household savings rate was reported to be 21.4%, up 0.4pp from the previous report.

For this estimate, the BEA assumed an effective annualized deflator of 4.29%. During the same quarter, the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was higher at 5.04%. Underestimating inflation results in optimistic growth rates, and if the BEA's nominal data was deflated using CPI-U inflation information the headline growth number would have been slightly lower at 5.92%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 5.34% rate, up 0.40pp from the previous estimate and up 5.66pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 2.06%, down -0.01pp from the previous report and up 0.16pp from the prior quarter. The combined consumer contribution to the headline number was 7.40%, up 0.39pp from the previous report.

-- The headline contribution for commercial/private fixed investments was revised to 1.96%, up 0.19pp from the previous report and down -1.08pp from the prior quarter.

-- Inventories subtracted -2.78% from the headline number, down -0.14pp from the previous report and down -4.15pp from the prior quarter. It is important to remember that the BEA's inventory numbers are exceptionally noisy (and susceptible to significant distortions/anomalies caused by commodity pricing or currency swings) while ultimately representing a zero reverting (and long term essentially zero sum) series.

-- The contribution to the headline from governmental spending was revised to 1.02%, down -0.10pp from the previous report and up 1.16pp from the prior quarter.

-- The contribution from exports was revised to -0.29%, down -0.19pp from the previous report and down -2.33pp from the prior quarter.

-- Imports subtracted -0.91% annualized 'growth' from the headline number, down -0.14pp from the previous report and up 2.66pp from the prior quarter. Foreign trade contributed a net -1.20pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was revised to 9.18%, up 0.15pp from the previous report and up 6.23pp from the prior quarter. This is the BEA's 'bottom line' measurement of the economy (and it excludes the inventory data).

-- As mentioned above, real per-capita annualized disposable income was revised $391 higher than in the previous estimate. The annualized household savings rate was 21.4% (up 0.4pp from the previous report). In the 51 quarters since 2Q-2008, the cumulative annualized growth rate for real per-capita disposable income has been 2.49%.

The Numbers, As Revised

As a quick reminder, the classic definition of the GDP can be summarized with the following equation:

1 2 3
View single page >> |

Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.