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Economy in Brief

U.S. Q2 GDP Revised Up Slightly
by Sandy Batten  September 30, 2021

• Consumer and business spending remain strong; residential and government spending weaken slightly.

• Inventory decline and trade deficit slightly smaller.

• Inflation unrevised but remains elevated.

The growth of real GDP in the second quarter of this year was revised up slightly to 6.7% q/q (SAAR) in the second revision from 6.6% in the first revision and 6.5% in the advance estimate. Apart from the rebound in Q3 2020 from the second quarter lockdowns, the pace of growth in Q2 2021 was the strongest since Q3 2003. The upward revision matched expectations in the Action Economic Forecast Survey. Demand remained strong with small upward revisions. Final sales growth was revised up to 8.1% from 7.9% and domestic final sales growth was revised up to 8.0% from 7.9%.

Looking at the major expenditure categories, real personal consumption expenditure growth was nudged up to 12.0% q/q (SAAR) from 11.9% previously. Apart from the Q3 2020 rebound, the pace of consumption growth in Q2 2021 was the fastest since 1952. Nonresidential fixed investment growth was revised down marginally to 9.2% from 9.3% and the decline in residential investment was deepened a bit to -11.7% from -11.5%. The decrease in spending by governments was revised to -2.0% from -1.9% previously with small downward revisions to each major category.

The gain in exports and imports were both revised up—the rise in exports to 7.6% q/q (SAAR) from 6.6% and the increase in imports to 7.1% from 6.7%. With the larger upward revision to exports than to imports, the trade deficit was revised slightly narrower and the drag it exerted on overall GDP growth was revised down to -0.18%-point from -0.24%-point previously. The marked decline in inventories in Q2 2021 was revised slightly smaller (-$80.2 billion vs. -$81.1 billion) and so the decline in inventories subtracted slightly less than previously estimated (-1.26%-point vs. -1.30%-point).

Inflation as measured by the GDP price indexes was mostly unrevised in this estimate though it remained quite elevated and broad-based. The GDP price index rose an unrevised 6.1% q/q (SAAR) in Q1, the fastest rate of increase since 1981, led by a 6.5% quarterly gain in the PCE price index (also unrevised). Strong gains in prices of residential investment, exports and expenditures of governments also contributed to the outsized gain.

The GDP figures can be found in Haver's USECON and USNA databases. USNA contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in AS1REPNA.

Chained 2012 $ (%, AR) Q2'21 (3rd Estimate) Q2'21 (2nd Estimate) Q2'21 (Advance Estimate) Q1'21 Q4'20 Q2'21 Y/Y 2020 2019 2018
Gross Domestic Product 6.7 6.6 6.5 6.3 4.5 12.2 -3.4 2.3 2.9
  Inventory Effect (% point) -1.3 -1.3 -1.1 -2.6 1.1 0.9 -0.5 0.1 0.1
Final Sales 8.1 7.9 7.7 9.1 3.4 11.3 -2.9 2.2 2.8
  Foreign Trade Effect (% point) -0.2 -0.2 -0.4 -1.6 -1.6 -1.6 -0.4 -0.2 -0.2
Domestic Final Sales 8.0 7.9 7.9 10.4 5.0 12.9 -2.5 2.4 3.0
Demand Components
  Personal Consumption Expenditure 12.0 11.9 11.8 11.4 3.4 16.2 -3.8 2.2 2.9
  Nonresidential Fixed Investment 9.2 9.3 8.0 12.9 12.5 13.3 -5.3 4.3 6.4
  Residential Investment -11.7 -11.5 -9.8 13.3 34.4 21.1 6.8 -0.9 -0.6
  Government Spending -2.0 -1.9 -1.5 4.2 -0.5 -0.1 2.5 2.2 1.4
Chain-Type Price Index
   GDP 6.1 6.1 6.0 4.3 2.2 4.1 1.3 1.8 2.4
    Personal Consumption Expenditure 6.5 6.5 6.4 3.8 1.5 3.9 1.2 1.5 2.1
       Less Food & Energy 6.1 6.1 6.1 2.7 1.2 3.4 1.4 1.7 2.0
    Nonresidential Investment 0.9 0.9 0.9 0.8 0.4 0.5 0.6 1.3 0.8
    Residential Investment 15.3 15.2 14.5 12.4 6.5 10.8 3.3 2.9 5.6
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