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

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

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