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:

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