GDP Surges 6.4% Fueled By Free Money Spending

Inflation-adjusted first-quarter 2021 GDP grew at an annualized rate of 6.4% led by personal spending.

Real GDP 

The BEA reports Real gross domestic product (GDP) increased at an annual rate of 6.4 percent in the first quarter of 2021. 

Key Details 

  • Real GDP 6.4% Seasonally Adjusted Annualized Rate (SAAR)
  • Current-dollar personal income increased $2.40 trillion in the first quarter, or 59.0 percent, compared with a decrease of $351.4 billion, or 6.9 percent, in the fourth quarter. 
  • The BEA used an overall price deflator of 4.1% as its measure of inflation.
  • Personal consumption expenditures rose 10.7%.
  • Disposable personal income increased $2.36 trillion, or 67.0 percent, in the first quarter, compared with a decrease of $402.1 billion, or 8.8 percent, in the fourth quarter. 
  • Real disposable personal income increased 61.3 percent, compared with a decrease of 10.1 percent.
  • Personal saving was $4.12 trillion in the first quarter, compared with $2.25 trillion in the fourth quarter. 
  • The personal saving rate—personal saving as a percentage of disposable personal income—was 21.0 percent in the first quarter, compared with 13.0 percent in the fourth quarter.

Notable Items

  • For the first time in four quarters the year-over-year numbers were 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%. 
  • 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.
  • 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 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). 
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