2Q2021 Gross Domestic Product: First (“Advance”) Estimate

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The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 2Q2021 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +6.50% (+8.0% expected), up 0.22 percentage point (PP) from 1Q2021’s +6.28%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 2Q2021 was 12.2% higher than in 2Q2020; that growth rate was significantly better (+11.6PP) than 1Q2021’s +0.5% relative to 1Q2020. Total GDP was $156 billion (chained 2012 dollars) above its prior 4Q2019 peak.

Only one grouping of GDP components -- personal consumption expenditures (PCE) was the driver behind the 2Q expansion; private domestic investment (PDI) and net exports (NetX) and government consumption expenditures (GCE) made minor negative offsets.

As for details --

PCE (Contributed +7.78PP to the headline, up 0.34PP from 1Q):

* Goods. Consumer spending for goods expanded at a rate of 2.68PP, a 3.01PP deceleration from 1Q, led by a $141.0 billion (nominal) increase in non-durable goods and an $80.3B increase in purchases of motor vehicles and parts.

* Services. Spending on services accelerated to +5.10PP (+3.35PP from 1Q), led by food services and accommodations (+$140.1B).

PDI (Detracted 0.57PP, down 0.20PP from 1Q):

* Fixed investment (+0.57PP, down 1.68PP from 1Q). Gains were greatest in intellectual property products (+$35.4B) and industrial equipment (+$22.9B).

* Inventories (-1.13PP, up 1.49PP from 1Q). Nonfarm inventories contracted by $74.7B.

NetX (Detracted 0.44PP, up 1.12PP from 1Q):

* Exports (up 0.94PP from 1Q). Goods exports rose by $117.2B.

* Imports (up 0.17PP from 1Q). Goods imports (recall that imports are inversely correlated with GDP) increased by $131.6B.

GCE (Detracted 0.27PP, down 1.04PP from 1Q). GCE rose in nominal terms (+$41.6B), led by state and local consumption expenditures (+$49.4B), but deflating those nominal dollars resulted in a negative contribution to the headline.

Annualized growth in the BEA’s real final sales of domestic product, which excludes the value of inventories) was +7.63% (down 1.27PP from 1Q).

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Consumer Metric Institute’s Rick Davis summarized the key points of this report as follows:

-- The recovery of consumer spending post-shutdown continues to be robust.

-- Household income is has not grown at the same rate. The increased spending has instead come from household savings that were stashed away during the shutdown.

“Under more normal circumstances the headline number would be very good news,” Davis concluded. “However, these are not normal times by any measure, and the displacement in household incomes warrants ongoing attention.”

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.