International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Saturday, February 27, 2021

Gross Domestic Product, Fourth Quarter and Year 2020

Real gross domestic product (GDP) increased at an annual rate of 4.1 percent in the fourth quarter of 2020 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 33.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 4.0 percent. With the second estimate, upward revisions to residential fixed investment, private inventory investment, and state and local government spending were partly offset by a downward revision to personal consumption expenditures (PCE) (see Technical Note).

Real GDP: Percent change from preceding quarter

The increase in real GDP reflected increases in exports, nonresidential fixed investment, PCE, residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

COVID-19 Impact on the Fourth-Quarter 2020 GDP Estimate
The increase in fourth-quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the fourth quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note and Federal Recovery Programs and BEA Statistics.

The increase in exports primarily reflected an increase in goods (led by industrial supplies and materials). The increase in nonresidential fixed investment reflected increases in all components, led by equipment (mainly transportation equipment). The increase in PCE was more than accounted for by spending on services (led by health care); spending on goods decreased (led by food and beverages). The increase in residential fixed investment primarily reflected investment in new single-family housing. The increase in private inventory investment was more than accounted for by an increase in manufacturing that was partly offset by a decrease in retail trade.

Current dollar GDP increased 6.1 percent at an annual rate, or $317.6 billion, in the fourth quarter to a level of $21.49 trillion. In the third quarter, GDP increased 38.3 percent, or $1.65 trillion (table 1 and table 3). More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA’s website.

The price index for gross domestic purchases increased 1.8 percent in the fourth quarter, compared with an increase of 3.3 percent in the third quarter (table 4). The PCE price index increased 1.6 percent, compared with an increase of 3.7 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 3.4 percent.

Updates to GDP

In the second estimate for the fourth quarter, real GDP increased 0.1 percentage point more than in the advance estimate issued last month, primarily reflecting upward revisions to residential fixed investment, private inventory investment, and state and local government spending that were partly offset by a downward revision to PCE. For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section that follows.

 
Advance Estimate Second Estimate
(Percent change from preceding quarter)
Real GDP 4.0 4.1
Current-dollar GDP 6.0 6.1
Gross domestic purchases price index 1.7 1.8
PCE price index 1.5 1.6
PCE price index excluding food and energy 1.4 1.4

Updates to Third-Quarter Wages and Salaries

In addition to presenting updated estimates for the fourth quarter, today's release presents revised estimates of third-quarter 2020 wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Wages and salaries are now estimated to have increased $434.5 billion in the third quarter, a downward revision of $66.5 billion. With the incorporation of these new data, real gross domestic income is now estimated to have increased 24.1 percent in the third quarter, a downward revision of 1.7 percentage points from the previously published estimate.

GDP for 2020

Real GDP decreased 3.5 percent in 2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019 (table 1).

The decrease in real GDP in 2020 reflected decreases in PCE, exports, private inventory investment, nonresidential fixed investment, and state and local government that were partly offset by increases in federal government spending and residential fixed investment. Imports decreased (table 2).

The decrease in PCE in 2020 was more than accounted for by a decrease in services (led by food services and accommodations, health care, and recreation services). The decrease in exports reflected decreases in both services (led by travel) and goods (mainly non-automotive capital goods). The decrease in private inventory investment reflected widespread decreases led by retail trade (mainly motor vehicle dealers) and wholesale trade (mainly durable goods industries). The decrease in nonresidential fixed investment reflected decreases in structures (led by mining exploration, shafts, and wells) and equipment (led by transportation equipment) that were partly offset by an increase in intellectual property products (more than accounted for by software). The decrease in state and local government spending reflected a decrease in consumption expenditures (led by compensation).

The increase in federal government spending reflected an increase in nondefense consumption expenditures (led by an increase in purchases of intermediate services that supported the processing and administration of Paycheck Protection Program loan applications by banks on behalf of the federal government). The increase in residential fixed investment primarily reflected increases in improvements as well as brokers’ commissions and other ownership transfer costs.

Current-dollar GDP decreased 2.3 percent, or $498.3 billion, in 2020 to a level of $20.93 trillion, compared with an increase of 4.0 percent, or $821.3 billion, in 2019 (tables 1 and 3).

The price index for gross domestic purchases increased 1.2 percent in 2020, compared with an increase of 1.6 percent in 2019 (table 4). The PCE price index also increased 1.2 percent in 2020, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 1.7 percent.

Measured from the fourth quarter of 2019 to the fourth quarter of 2020, real GDP decreased 2.4 percent during the period (table 6). That compared with an increase of 2.3 percent during 2019.

The price index for gross domestic purchases, as measured from the fourth quarter of 2019 to the fourth quarter of 2020, increased 1.3 percent during 2020. That compared with an increase of 1.4 percent during 2019. The PCE price index increased 1.2 percent, compared with an increase of 1.5 percent. Excluding food and energy, the PCE price index increased 1.4 percent, compared with an increase of 1.6 percent.

*          *          *

Next release, March 25, 2021 at 8:30 A.M. EDT

https://lawprofessors.typepad.com/intfinlaw/2021/02/gross-domestic-product-fourth-quarter-and-year-2020.html

Economics | Permalink

Comments

Post a comment