GDP Report Shows Chugging Economy

Hot, but not red-hot: the Bureau of Economic Analysis said its final estimate of first-quarter Gross Domestic Product showed an economy firing on all cylinders.

The BEA final (third) estimate, based on more complete source data than its previous estimates, reported GDP at an annual rate of 6.4 percent in the first quarter, unchanged from its second (revised) estimate. In the fourth quarter, real GDP increased 4.3 percent. Upward revisions to nonresidential fixed investment, private inventory investment and exports were offset by an upward revision to imports, which subtract in the calculation.

BEA said the increase in real GDP in the first quarter reflected increases in personal consumption expenditures, nonresidential fixed investment, federal government spending, residential fixed investment and state and local government spending that were partly offset by decreases in private inventory investment and exports. Imports increased.

“The increase in first quarter GDP reflected the continued economic recovery, reopening of establishments and continued government response related to the COVID-19 pandemic,” BEA said.

BEA noted in the first quarter, government assistance payments, such as direct economic impact payments, expanded unemployment benefits and Paycheck Protection Program loans, were distributed to households and businesses through the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.

The report said the increase in PCE reflected increases in durable goods (led by motor vehicles and parts), nondurable goods (led by food and beverages) and services (led by food services and accommodations). The increase in nonresidential fixed investment reflected increases in equipment (led by information processing equipment) and intellectual property products (led by software). The increase in federal government spending primarily reflected an increase in payments made to banks for processing and administering the Paycheck Protection Program loan applications as well as purchases of COVID-19 vaccines for distribution to the public. The decrease in private inventory investment primarily reflected a decrease in retail trade inventories (mainly by motor vehicles and parts dealers).

Current dollar GDP increased 11.0 percent at an annual rate, or $566.8 billion, in the first quarter to a level of $22.06 trillion. In the fourth quarter, GDP increased 6.3 percent, or $324.4 billion.

The report said profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $55.2 billion in the first quarter, in contrast to a decrease of $31.4 billion in the fourth quarter. Profits of domestic financial corporations decreased $6.4 billion in the first quarter, in contrast to an increase of $17.5 billion in the fourth quarter. Profits of domestic nonfinancial corporations increased $72.1 billion, in contrast to a decrease of $48.2 billion.