BEA Reports That First Quarter 2021 GDP Grew At A 6.39% Rate

In their first (preliminary) 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 +6.39% annual rate, up 2.07 percentage points (pp) from the prior quarter.

For the first time in four quarters, the year-over-year numbers were also looking positive. The overall year-over-year first-quarter growth of the US GDP was reported to be +2.26%, with consumer spending on goods (+13.85%) and commercial fixed investments (+7.08%) leading the way. Even the year-over-year contraction in consumer spending on services was a manageable -1.35%.

In an earlier release, annualized real per capita household disposable income was reported to have rebounded spectacularly from $46,654 to $52,549 during the quarter, pushing the household savings rate to 21.0% -- up 8.0pp from the prior quarter.

For this estimate, the BEA assumed an effective annualized deflator of 4.07%. 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 5.68%.

Among the notable items in the report :

-- Consumer spending for goods was reported to be growing at a 4.94% rate, up 5.26pp from the prior quarter.

-- The contribution to the headline from consumer spending on services was reported to be 2.07%, up 0.17pp from the prior quarter. The combined consumer contribution to the headline number was 7.01%, up 5.43pp from the prior quarter.

-- The headline contribution for commercial/private fixed investments was reported to be 1.77%, down -1.27pp from the prior quarter.

-- Inventories subtracted -2.64% from the headline number, down -4.01pp 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 reported to be 1.12%, up 1.26pp from the prior quarter.

-- The contribution from exports was reported to be -0.10%, down -2.14pp from the prior quarter.

-- Imports subtracted -0.77% annualized 'growth' from the headline number, up 2.80pp from the prior quarter. Foreign trade contributed a net -0.87pp to the headline number.

-- The annualized growth in the 'real final sales of domestic product' was reported to be 9.03%, up 6.08pp 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 reported to have increased by $5,895 quarter to quarter. The annualized household savings rate was 21.0% (up 8.0pp from the prior quarter). In the 51 quarters since 2Q-2008, the cumulative annualized growth rate for real per-capita disposable income has been 2.43%.

The Numbers

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.