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).
The notable items are from the Consumer Metrics Institute.
Real GDP Billions of Chained Dollars 2021-Q1 Preliminary
Despite the strength over the last three quarters GDP still has not recovered from the pandemic.
Income and Spending
It’s not hard to generate strong growth when Q1 federal transfers soar to $6tn (28.6% of personal income). Strip out Biden Benefits, and real incomes were flat & have been stagnant for two years! Stimulus checks/jobless benefits have come to define the vitality of the US economy.
— David Rosenberg (@EconguyRosie) April 29, 2021
The 59% jump in income reflects government social benefits related to pandemic relief programs, notably direct economic impact payments to households established by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.
If you give away free money, people spend it. And they did to the tune of a 10.7% jump.
Then if you undercount inflation, you get distorted growth figures.
That’s what’s going on.
Mish
Absolutely Mish, but if the US government didn’t do this, America would be like Mexico, where covid is rampant, the poor are starving, and where the central government has decided that the best action is to do nothing…sometimes you have poor choices, but the fact that people are spending the money is also an indication that they needed the money. You should also note that credit card debt has been going down, so some people reduced their debt burden.
At the end of the day you have to decide, is it always and only about the money or is there room for compassion.
I disagree. The government could have chosen to not shut down the economy and focused on protecting the elderly and other high risk individuals. Let the remaining 95% continue their lives normally.
Just pump more stimulus like 60T then GDP will surge 60+% !
Free money will show tremendous people saving, and if it works
why not printing 600T so every American will be millionaires!
including millions new illegal immigrants from South America!
The problem with all problems is we never actually use the scientific method. We could of saved all the banks East of the Mississippi in 2009, and not West. Looked at the results and then we would know if the Bernanke did save the world or not. Same with Covid. Lock down the East and not the West, then study the results. Economists are the new witch doctors.
Juvenalian satire?
Based on how the states that lifted lockdowns are doing, I think it’s safe to say the lockdowns accomplished very little if anything. Of course, this is with the benefit of hindsight.
The free money did what it was supposed to do. It kept the economy from crashing. It will have been worth it unless it leads to continual future free money for reasons that aren’t nearly as good, which is the fear I have.
I still don’t know exactly how bad I really did last year. I hope my taxes are done soon. I’m guessing it will end up being my lowest income year in more than 20 years. This year may not be super great either, although I’m busy as hell.
I didn’t default on anything, and I finally got my last furloughed employee back on the clock (other than a couple who didn’t want to come back. )
And I didn’t die of COVID and I didn’t get sick, and I didn’t make anybody else sick. I spent far less than I usually do, and I spent 100% of bailout funds on expenses that met the criteria. I took on an extra $150K of long term debt, unless somehow EIDL loans get forgiven, which I’m not counting on.
For me, it’s a win. I think for the country overall it was a win, other than for those who lost loved ones or got sick or died trying to take care of other people.
The great unknown right now is when mortgage / rent forbearance will end and along with it the ability to finally foreclose / evict. I suspect there has been a LOT of people just spending their rent money on goods/stocks with no plans to ever pay and just see how long they can live rent/mortgage free. If 2008 is any indication it could be another year before the cases clear in which case they may have made out with 20-50K in free money if they haven’t paid in 2 years.
I’ve seen some people speculate that they can never roll back the forbearance because of the shock it would cause in homelessness. It’s going to be really interesting.
COVID has been great for me. I didn’t have to drive to and from work. I continued to collect salary the whole time. I got transfer payments. And I was able to stay home and help my wife who was dying of cancer. I recently found out that working from home will be permanent. The company I work for is either getting rid of their office altogether or greatly shrinking their office space.
Too funny. There is a big economic drop-off due to Covid restrictions. But then when the restrictions ease and economic activity bounces back, it does so from an artificially low level, making the bounce up look very impressive numerically, yet we are still behind where we were prior to Covid in many measures.
All of which makes for nice headlines but doesn’t mean much at all.
Which numbers do you mean?
Ain t life jus great in the Land of Oz ??
Pay no attention to that man behind the curtain!
Some free money, some lies. Seems to work for now, and now is the immediate problem. The future looks unsolvable, so all we can do is continue to muddle.
Hey Mish,
Can you comment more on that last line in your post – ‘Then if you undercount inflation, you get distorted growth figures.’ I’d also be interested in your take on the inflation vs. deflation debate and the best place to spot global (developing) vs. developed inflation.
Mario.
I commented on distorted GDP here:
I do not have Case-Shiller housing stats except for the US to comment elsewhere.
GDP numbers are inflation adjusted.
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