3Q2021 Gross Domestic Product: Second Estimate

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In its second estimate of 3Q2021 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) edged up the growth rate of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +2.11% (+2.1% expected), up 0.09 percentage point (PP) from the “advance” estimate (“3Qv1”) but -4.62PP from 2Q2021.

As with 3Qv1, three groupings of GDP components -- personal consumption expenditures (PCE), private domestic investment (PDI) and government consumption expenditures (GCE) -- were the drivers behind the 3Q expansion; net exports (NetX) detracted from the headline. As for details:

PCE. Contribution to 3Q headline: +1.18PP; -6.74PP from 2Q and +0.09PP from 3Qv1. Spending on goods was revised up by $11.7 billion (nominal), led by motor vehicles and parts (+$12.5B). That was largely offset by a downward revision to spending on services (-$5.6B), led by other services (-$7.3B).

PDI. Contribution to 3Q headline: +1.93PP; +2.58PP from 2Q and -0.01PP from 3Qv1. PDI was revised up by $0.9B, led by nonresidential structures (+$4.1B); nonfarm inventories also were nudged up by $2.9B. The broad-based upward revisions were largely offset by downward revision to intellectual property products (-$7.2B).

NetX. Contribution to 3Q headline: -1.16PP; -0.98PP from 2Q and -0.02PP from 3Qv1. A downward revision to goods exports (-$1.7B) was nearly offset by a downward revision to imports (-$1.5B), led by services (-$2.4B). Recall that changes in imports are inversely correlated with changes to the GDP headline.

GCE. Contribution to 3Q headline: +0.16PP; +0.52PP from 2Q and +0.02PP from 3Qv1. GCE was revised higher (+$6.7B), led entirely by state and local government spending (+$6.8B).

The BEA's real final sales of domestic product -- which ignores inventories -- was revised to -0.02% (+0.02PP from 3Qv1), a level 8.01PP below the 2Q estimate. 

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Frankly, few of these revisions are statistically significant. Moreover, to paraphrase Consumer Metric Institute’s Rick Davis, this report tells us nothing about the current quarter.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.